South Africa’s gross domestic product (GDP) increased by 1.6% quarter-on-quarter in the third quarter, Statistics South Africa (Stats SA) reported on December 6.

Stats SA Economic Statistics deputy director-general Joe de Beer said the most significant revision for the second quarter was recorded for agriculture.

The agriculture, forestry and fishing industry output increased by 19.2% in the third quarter, contributing 0.5 of a percentage point to GDP growth. Increased economic activities were reported for field crops and horticulture products.

De Beer highlighted that, positively, economic growth was widespread across the economy, with eight of the ten indicators surveyed showing positive growth. The only negatives came from personal services and electricity, gas and water.

Finance, real estate and business services increased at a rate of 1.9% in the quarter, contributing 0.5 of a percentage point to GDP growth. Increased economic activity was reported for financial intermediation, insurance and pension funding, auxiliary activities, real estate activities and other business services.

The transport, storage and communication industry increased by 3.7%, contributing 0.3 of a percentage point. Increased economic activities were reported for land transport, transport support services and communications services.

The manufacturing industry increased by 1.5% in the period, contributing 0.2 of a percentage point. Seven of the ten manufacturing divisions reported positive growth rates in the period.

The motor vehicles, parts and accessories and other transport equipment division made the largest contribution to the increase in the quarter.

The food and beverages division and the basic iron and steel, non-ferrous metal products, metal products and machinery division also made considerable contributions to growth.

Year-on-year, real unadjusted real GDP grew by 4.1%.

The unadjusted real GDP at market prices for the first nine months of the year increased by 2.3% compared to the previous year.

De Beer indicated that the size of the economy in the period was larger than it was before the pandemic, showing economic recovery from Covid-19.

He also noted that all three sectors of the economy grew in the period.

Both agriculture and mining drove up the primary sector in the period, with this sector growing by 8.2%.

The secondary sector grew by 1.2%, boosted by manufacturing and construction.

The tertiary sector grew by 1.1% in the quarter.

De Beer said nominal GDP was estimated at R1.69-trillion in the period.

In nominal terms, the biggest movers in the period were the finance and manufacturing sectors, while the biggest decreases were in construction and agriculture.

De Beer also outlined that expenditure on GDP increased by 1.6% in the period; exports and government consumption pushed expenditure on GDP higher in the period; and household financial consumption expenditure decreased by 0.3% in the quarter. 

COMMENTARY

PPS Investments portfolio manager Reza Hendrickse says the growth in the quarter was considerably ahead of economist expectations, with forecasters, including the South African Reserve Bank, having forecast third-quarter growth of just 0.4%.

“Given the upside surprise, there is a good chance 2022 growth will exceed the Reserve Bank and the National Treasury’s sub-2% expectation,” Hendrickse notes.

“Better-than-expected third-quarter growth is refreshingly positive given the sustained wave of negative news both locally and abroad. However, we would caution against reading too far into the rebound, which was driven largely by more volatile, cyclical elements. Forward-looking data, such as PMI’s and confidence measures also suggest subdued conditions ahead, with electricity availability still a major headwind,” he cautions.

Hendrickse highlights another challenge as the global economy currently being on a downswing.

“After all, the South African economy is highly cyclical given its reliance on global trade and the commodity cycle,” Hendrickse points out.

Matrix Fund Managers economist and macrostrategist Carmen Nel, meanwhile, says that, while the data reveals some resilience in production and external demand, it points to a consumer that is feeling the pinch.

“As such, it should have nuanced implications for monetary policy. At a headline level, the economy expanded by 2.3% for the year to September and even if it contracts in quarter four, full year growth is likely to print around 2% to 2.5%. This implies a smaller, negative output gap, all else assumed equal, and a slightly higher path for the repo rate,” Nel outlines.

“Global growth is decelerating, and financial conditions are still tightening, with developed market economies probably heading toward a recession. It would be hard for South Africa to buck the trend under that scenario, so global factors still pose a significant risk to the domestic growth outlook,” Nel says.

“The statistics show us that our economy is not stagnant but rather moving towards an upward trajectory. Despite inflationary pressures and the high cost of living, we are emerging resilient, and our fiscal position is improving,” comments Minister in the Presidency Mondli Gungubele.

“The growth exceeded market expectations which was envisioned at 0.4% to 0.7%. Notably, Stats SA’s data shows that South Africa’s economy in the third quarter was larger than it was before the Covid-19 pandemic, which is positive and welcomed news for economic recovery following two years of lockdown. Implementation of the country’s Economic Reconstruction and Recovery Programme continues earnestly,” Gungubele adds.