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Economy moves 'sideways' with marginal 0.2% contraction in GDP

Stats SA economic statistics deputy director general Joe de Beer

Stats SA economic statistics deputy director general Joe de Beer

5th December 2023

By: Darren Parker

Creamer Media Contributing Editor Online

     

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Statistics South Africa (Stats SA) has reported a marginal 0.2% contraction in gross domestic product (GDP) for the third quarter, compared with the second quarter, and a contraction of 0.7% compared with the third quarter of 2022, which Stats SA economic statistics deputy director-general Joe de Beer described as “very much a sideways movement” in the economy.

In terms of real GDP, nine months on nine months, there was an increase of 0.3%. In addition, Stats SA issued a revision for GDP production in the second quarter, lowering it from 0.6% to 0.5%.

“Overall, with the numbers being so small positive and so small negative, it’s really difficult to pinpoint a specific big reason of what is happening in the economy because everybody's either contributing basically nothing or subtracting basically nothing,” he said at the release of the third-quarter GDP statistics on December 5, in Pretoria.

In terms of the primary sector, a 4.4% contraction was recorded quarter-on-quarter, with agriculture down 9.6% and mining down 1.1%.

Agricultural decline was recorded for field crops, animal products and horticultural products, while mining showed decreased economic activity in platinum group metals, gold, coal and diamonds.

The secondary sector was also down by 1.3% quarter-on-quarter, with manufacturing going down 1.3%, electricity up 0.2% and construction down 2.8%.

In manufacturing, the food, beverages and tobacco division made the largest negative contribution to growth, while in electricity, gas and water, economic activity was mainly driven higher by increases in the production and consumption of electricity during the period.

Decreases in the construction sector were also reported for residential buildings, non-residential buildings, and construction works in general.

In the tertiary sector, a contraction was recorded in most sectors, with an overall increase of 0.4% across the board. In general, trade was down -0.2%, with decreased economic activity reported for wholesale motor trade and food and beverages.

Transport was up 0.9%, with an increase reported in land transport, air transport, transport support services, and communications.

Finance also showed growth of 0.5%. This rise was driven by increased activities in financial intermediation, real estate, and business services.

In terms of government, rising employment numbers in the civil service meant that government's contribution to GDP went up by 0.1%.

Personal services also went up by 0.6%, thanks to increased economic activity being reported in health and education.

In terms of the percentage contribution of industries to the total value added to the economy, finance represented the largest slice of the pie at 24%. Second was personal services at 16%, with manufacturing at 15% and trade at 14%. Government represented 9%, with transport at 8%, mining at 7%, and electricity, gas and water at 4%. Agriculture and construction each only represented 2% of the total contribution to total value added.

Overall expenditure on real GDP decreased by -0.1% in the third quarter. Household final consumption expenditure decreased by -0.3%, contributing -0.2 of a percentage point to the total negative growth. Decreases were reported for durable goods, non-durable goods, and services.

Overall, the semi-durable goods category was the only positive contributor in the third quarter when it comes to household consumption, with semi-durable goods up to 2.2%. Services went down by -0.2%, while durable goods went down by -0.7%, and non-durable goods went down by -1%.

The main negative contributors to the decrease in household final consumption expenditure were expenditures on transport, which was -1.6%, contributing -0.2 of a percentage point, with housing, water, electricity, gas, and other fuels down -0.8% and contributing -0.1 of a percentage point.

The positive contributors were expenditures on clothing and footwear, as well as restaurants and hotels, health, education, and food and non-alcoholic beverages.

Final consumption expenditure by general government increased by 0.3% in the third quarter, mainly driven by an increase in compensation of employees.

Total gross fixed capital formation decreased by -3.4% in the third quarter. The main negative contributors to the decrease were machinery and other equipment, which was down -3.2% and contributed -1.3 percentage points, and all transport equipment was also down by -6.7%, contributing -0.7 of a percentage point. While other assets were down by -5.7%, contributing -0.6 of a percentage point, construction works were also down by -3.1%, contributing -0.5 of a percentage point.

Stats SA reported a R44.5-billion drawdown of inventories in the third quarter. Large decreases in three industries, namely manufacturing; mining and quarrying; and transport, storage and communication, contributed to the inventory drawdown.

Net exports also contributed negatively to expenditure on GDP in the third quarter. Exports of goods and services increased by 0.6%, largely influenced by increased trade in vehicles and transport equipment, pearls, precious and semi-precious stones, precious metals, and vegetable products.

Imports of goods and services decreased by 8.6%, which was largely influenced by decreased trade in machinery and electrical equipment, as well as chemical products, artificial resins and plastics, base metals and articles of base metals, vegetable products, and vehicles and transport equipment.

Overall, GDP in the third quarter of this year was lower than the peak reached in the third quarter of last year.

“All of the contributions to growth vary between 0.1 and -0.3. So that just means that the economy has moved sideways. If an industry expands by 0.1, with different rounding, it could have been a 0.2 or it could have been a zero. So the numbers are just oscillating around an axis of zero. There's no clear trend in the economy in this quarter.

"There's no specific two or three industries that were growing at a very high rate or contracting at a very high pace. So it's very much a sideways movement picture that we’ve seen here,” De Beer said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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