GDP shrinks by 0.7% in Q2

South Africa’s economy decreased by 0.7% in the second quarter (Q2) of 2022, slumping from the 1.9% growth recorded for the first three months of the year.

This is according to Statistics South Africa’s (Stats SA) routine release of the country’s quarterly gross domestic product (GDP) figures on Tuesday. The latest GDP figures came close to the 0.8% median growth estimate forecasted by 12 economists surveyed by Bloomberg.

The deterioration in economic performance this quarter was led by lower economic activity being reported in the manufacturing, agricultural and mining and quarrying industries.

The manufacturing industry, according to Stats SA, decreased by 5.9% this quarter, chipping a 0.7 percentage point away from quarterly growth.

“The petroleum, chemical products, rubber and plastic products division made the largest contribution to the decrease in the second quarter.”

The agricultural sector on the other hand registered a 7.7% decrease this period, a drop led by a decrease in economic activity for animal products, Stats SA noted.

The mining and quarrying industry saw a 3.5% slump as the industry experienced a drop in activity for gold, coal, manganese ore and diamonds this quarter.

A decrease in economic activity for residential buildings and construction led the 2.4% drop for the construction industry, while a decrease in activity for wholesale trade and retail trade saw a 1.5% drop in performance for the trade, catering and accommodation sectors.

Nationwide rolling blackouts together with the destructive floods which affected parts of KwaZulu-Natal and the Eastern Cape (the country’s manufacturing hubs) during the first half of the year have contributed to the current economic picture painted by the national stats agency.

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Expenditure on GDP

According to Stats SA, expenditure on real GDP decreased by 0.7% this period. Household final consumption expenditure (HFCE) grew 0.6% in Q2, with the largest contribution to this growth being reported in services.

Spend on alcohol, tobacco, clothing, housing, furnishings and recreation contributed negatively to growth in HFCE in Q2.

This comes as no surprise however, as consumers have had to battle a tough inflationary environment in the last few months, with higher fool and fuel prices limiting many consumers’ disposable income

“Final consumption expenditure by general government decreased by 0,7% in the second quarter. Decreases in employment numbers and spending on goods and services were reported,” Stats SA added.

Total gross fixed capital formation increased by 0.5% this quarter, supported by contributions from machinery and equipment, transfer costs and other assets.

“There was a R27 billion build-up of inventories in the second quarter of 2022 (seasonally adjusted and annualised value). Increases in trades, transport and communication and finance contributed to the inventory build-up experienced in the second quarter of 2022.”

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