South Africa slides into recession
South Africa has officially entered a technical recession after Stats SA announced on Tuesday that the country’s real gross domestic product had decreased by 0.7% in the second quarter of the year.
This follows a GDP contraction of 2.2% in the first quarter. A technical recession is two consecutive quarters of negative growth.
The first quarter’s GDP contraction has now also been revised upward to -2.6%. This is SA’s first recession since the 2008/2009 global financial crisis.
Shortly after the economic data release at 11:30, the rand piled on losses against the dollar, falling to a daily low of R15.23/$, down 2.4% on the day.
Ahead of the announcement in Pretoria, analysts at FNB had been cautiously optimistic that SA could avoid a recession, but said it would be a ‘close call’.
The ABSA Purchasing Manager’s index for August, meanwhile, released Monday came in at a 13-month low.
Agriculture takes a hit
The largest negative contributors to GDP growth were the agriculture industry – which decreased by a whopping 29.2%, followed by the transport industry (-4.9%) and trade (-1.9%).
“This [decrease in agriculture] was largely driven by a decline in the production of field crops and horticultural products,” said Stats SA in a media statement. “Continued drought conditions in Western Cape and a severe hailstorm in Mpumalanga, resulting in extensive crop damage, also placed additional pressure on production in the second quarter.”
The main positive contributors were mining, up 4.9% and the finance, real estate and business services industry, which increased 1.9%.
For the first time since Q1 2016, households also cut consumption expenditure, which decreased by 1.3% for the quarter. The biggest cuts were recorded for spending on transport, food and drinks, according to Stats SA.
Government expenditure, meanwhile, grew by 0.7%. Total investment, also known as gross fixed capital formation, decreased by 0.5%.
Net exports contributed positively to growth in GDP through expenditure. Exports were up 13.7% for the quarter due to increased trade in precious metals, mineral products and vegetable products. Imports increased by 3.1% and were driven by imports of mineral products, prepared foodstuffs, beverages and tobacco and vehicles and transport equipment, according to Stats SA.