The Real Economy Bulletin - Second Quarter 2016

Main bulletin: The Real Economy Bulletin - Second Quarter 2016

In this edition:

Quarterly GDP growth: South Africa’s GDP grew by 0,8% in the second quarter of 2016, in a marked recovery from the 0,3% contraction in the first quarter of the year.  Mining and manufacturing made the largest sectoral contributions to growth. Mining grew (quarter on quarter) by 2,8%, while manufacturing grew by 2,0%. Agriculture continued to decline as the drought persisted, utilities fell by 0,4% and construction remained unchanged. Read more.

Employment: Despite the relatively rapid growth in GDP in the second quarter of 2016, according to the official data employment in the economy as a whole fell by 130 000, or around 0,8% in the second quarter of 2016 compared to the first quarter, and around 0,7% when compared to the previous year. Read more

Trends in trade: The second quarter of 2016 saw a strong uptick in exports combined with falling imports, mostly due to the falling price of petrol. The resulting improvement in the balance of trade boosted GDP growth. While both manufacturing and mining exports fell in dollar terms, they expanded in constant rand, with manufacturing exports rising by 8.6% and mining by 5.1%. Agricultural exports also performed exceptionally during the quarter, but that partly reflects seasonal factors. Read more.

Investment and profitability: A decline in investment, particularly by the state, was the biggest drag on GDP growth in the second quarter of 2016. Profitability across the economy declined in the first quarter of 2016 compared to the first quarter of 2015, with worsening losses in mining. In contrast, manufacturing and construction enjoyed a higher profit rate for the quarter compared to the previous year. Read more.

Behind the trends: Exports were the main driver of the surge in growth in the GDP in the second quarter of 2016, largely thanks to the auto industry. Critical for export growth was the persistence of relatively competitive exchange rates as well as some recovery in the U.S. and Europe in the past year.  While welcome, these developments emerged in the context of fairly gloomy prospects for growth in the medium term. Read more.

Growth in the BRICS: Divergent developments in the BRICS in the past five years illustrate the extraordinary impact of the slowdown in Chinese growth on middle-income economies. They also show how this kind of sharply slower growth can play out in greater political contestation and uncertainty. Read more.

Growth in the SADC: The rest of Africa now represents around 30% of South Africa’s export market, up slightly from 2010. The bulk of South African exports to the rest of the continent go to Namibia, Botswana, Mozambique, Zambia and Zimbabwe. Because the region is growing rapidly compared to most other regions, despite the end of the commodity boom, it represents a significant opportunity. Read more.

Briefing note - Impact of the drought: Despite the relatively strong growth in the rest of the economy in the past quarter, agriculture posted its sixth consecutive quarter of economic decline.Stats SA reported that, in seasonally adjusted terms, agriculture contracted by almost 15% from R78 billion in the fourth quarter of 2014 to R66 billion in the second quarter of 2016. Read the briefing note online: Impacts of the drought.