JSE, rand slip as SA GDP shrinks

The JSE closed weaker on Tuesday while the rand extended the previous session’s losses after official data showed SA’s economy shrank in the third quarter.

GDP contracted 0.2% in the three months to end-September, pulling back from two consecutive quarters of expansion, Stats SA reported on Tuesday. Second-quarter GDP growth was revised down to 0.5% from 0.6%.

The median estimate of economists in a Bloomberg survey was for a contraction of 0.3% quarter on quarter.

Agriculture was the worst-performing sector over the three months, with a decline in output recorded for field crops, and animal and horticulture products, Stats SA said.

“Overall, domestic demand weakened, and there were specific shocks, namely the burning of trucks along key national corridors, as well as a protracted taxi strike and flooding in the Western Cape, which also disrupted economic activity in the reference quarter,” said FNB senior economist Thanda Sithole. “We expect economic growth to remain lacklustre amid infrastructure constraints. While loadshedding persists, we expect the intensity to have peaked this year (specifically in the second quarter), and a gradual improvement is built into our baseline forecast,” Sithole added.

“A gradual lift next year is envisaged, underpinned by reduced loadshedding, lower inflation, and the projected interest rate relief.”

The JSE all share ended 0.96% weaker at 75,215 points, breaking a three-day winning streak, while the top 40 was down 1.11%.

Adriaan Pask, CIO at PSG Wealth, said protracted load-shedding and political uncertainty are expected to continue to weigh on the SA economy and investor sentiment.

“But these risks are already priced into very depressed valuation levels in large portions of the local market. Therefore, our outlook for local equities remains favourable,” he added.

The rand touched an intraday worst of R19.0203 — the weakest level in five weeks — “with the dollar regaining some ground and hovering near a one-week high against its major peers,” said Citadel Global director Bianca Botes.

At 5.49pm, the rand had weakened 0.96% to R18.9854/$, 0.81% to R20.527/€ and 0.95% to R23.952/£. The euro was 0.22% softer at $1.0812.

At 6.17pm, the Dow Jones industrial average was 0.41 weaker at 36,056.65 points, while markets in Europe were mixed.