Third quarter GDP increases 66.1%

The South African economy increased by an annualised rate of 66.1% in the third quarter (Q3) of 2020, as lockdown restrictions were eased and more economic activity was permitted.

This is a sharp increase from an annualised figure of 51% in Q2, when the country’s economic activity was restricted due to the lockdown implemented to curb the spread of Covid-19.

Read: GDP collapses 51% in the second quarter

The quarter-on-quarter seasonally-adjusted growth rate for Q3 was 13.5%, down from 16.4% in Q2.

The increase in GDP however did not translate to a decrease in unemployment figures which showed an increase of 7.5 percentage points to 30.8% in Q3 from a record low of 23.3% in Q2 (Q1: 30.1%).

This coincided with the hard lockdown when prospective job seekers were unable to look for work.

Read: Unemployment is worse than the official figures state

These “extremities” in the data are expected because the country’s economy has never experienced a shock such the pandemic, says Statistician-General, Risenga Maluleke, adding that the phenomena has been experienced across the world.

During a presentation of the data, Statistics SA deputy director-general for economic statistics Joe de Beer further explained that during periods of extreme disruption such as Covid-19 or load shedding, the annualised figure for GDP may be slightly distorted. The annualised figure assumes that the external influence will be maintained for the entire calendar year.

This was amplified this year because of the pandemic because the “behaviour of the economy in the first and second quarter assumed that Covid-19 would continue to [disrupt]…Similarly now the annualised figure assumes that the sharp recovery will be maintained for the entire calendar year, “he said.

De Beer however, told Moneyweb that the annualised figure remains useful as it “still preserves the time series because otherwise, you will have a number that cannot be compared with anything else.”

“For comparability, you don’t want to change definitions because the environment changed. What you would rather do is to provide alternative measures.”

The unadjusted real GDP at market prices for the first nine months of 2020 decreased by 7.9% compared with the first nine months of 2019. This is the average number of the past three quarters. De Beer says this data point is also useful as it gives the public a more “stable “representation of the economy, compared with the figures shown in Q1 and Q2 of 2020.

Stats SA said the quarter-on-quarter growth rate also remains useful. It can be annualised to show what the annual (i.e. year-on-year) rate would be if the quarter-on-quarter rate were to occur four times in succession.

“The annualised rate provides a crude forecasting model that is useful in times of stable economic performance, but less so in a highly volatile environment,” the report reads.

Nominal GDP was estimated at R1.27 trillion in Q3, up by R193 billion from Q2. Manufacturing was up by R44 billion to R156 billion, trade was up by R40 billion to R167 billion and mining was up R28 billion to R101 billion

All sectors of the economy grew in Q3. The manufacturing industry increased at a rate of 210.2%, contributing 16.2% to GDP growth.

The mining and quarry industry increased at a rate of 288.3% in Q3, contributing 11.8% to GDP growth. These industries greatly benefited from the easing of restrictions domestically and internationally.

“Higher production was mainly due to increased activities in the production of the platinum group metals (PGMs), iron ore, gold, manganese ore and diamonds,” Stats SA said in a statement on Wednesday.

The trade, catering and accommodation industry increased at a rate of 137%, while the transport, storage and communication industry increased at a rate of 79.3% because of increases in land transport, air transport, transport support services and communication services.

The construction industry increased by 71.1% in the third quarter.