Econ­omy re­mains in re­ces­sion – now by big­ger mar­gin

The Star Early Edition - - NEWS - Pali Le­hohla Dr Pali Le­hohla is South Africa Statis­ti­cian-Gen­eral and Head of Stats SA

THE SOUTH African econ­omy moved into re­ces­sion with the re­ported de­crease of 0.7 per­cent in gross do­mes­tic prod­uct (GDP) dur­ing the first quar­ter of 2017, on the back of a 0.3 per­cent con­trac­tion in the fourth quar­ter of 2016.

South Africa has ex­pe­ri­enced seven eco­nomic re­ces­sions since 1961, the long­est oc­cur­ring over two years, 1991 and 1992, mainly as re­sult of a global eco­nomic down­turn and the po­lit­i­cal speci­fici­ties of South Africa then. The most re­cent re­ces­sion oc­curred over three quar­ters in 2008/09, on the back of the global fi­nan­cial cri­sis.

We ob­serve that in the first quar­ter of 2017, both the sec­ondary and ter­tiary sec­tors recorded neg­a­tive growth rates. The trade and man­u­fac­tur­ing in­dus­tries were the ma­jor heavy­weights that sti­fled pro­duc­tion, with trade fall­ing by 5.9 per­cent and man­u­fac­tur­ing by 3.7 per­cent.

On the pos­i­tive side, agri­cul­ture and min­ing in­dus­try con­tributed pos­i­tively to growth, but not enough to avoid the re­ces­sion. Trade ex­pe­ri­enced pro­duc­tion falls across the board, par­tic­u­larly in cater­ing and ac­com­mo­da­tion and whole­sale trade. Man­u­fac­tur­ing found it­self ham­strung by lower pro­duc­tion lev­els pri­mar­ily in food and bev­er­ages and pe­tro­leum and chem­i­cal prod­ucts.

Pos­si­bly the most im­por­tant as­pect of this quar­ter’s re­sults is the ter­tiary sec­tor. The sec­tor – com­pris­ing the fi­nance, trans­port, trade, the gov­ern­ment and per­sonal ser­vices in­dus­tries – recorded its first quar­ter of de­cline since the sec­ond quar­ter of 2009, when South Africa was in a re­ces­sion as well.

How­ever, from agri­cul­ture for the first time since the fourth quar­ter of 2014 that the in­dus­try has shown growth.

A jump in pro­duc­tion in field crops and hor­ti­cul­tural prod­ucts lifted the in­dus­try in the first quar­ter. This might be one of the first signs of re­cov­ery from one of the tough­est droughts in re­cent his­tory.

Min­ing’s growth was mainly a re­sult of a rise in pro­duc­tion of gold and other metal ores, in­clud­ing plat­inum.

Stats SA pub­lishes es­ti­mates of GDP ev­ery quar­ter. It is one of the most an­tic­i­pated sta­tis­ti­cal re­leases on the cal­en­dar as it cap­tures the dy­nam­ics of the econ­omy in a sin­gle num­ber. The key num­ber is ex­pressed as the sea­son­ally ad­justed an­nu­alised growth be­tween two con­sec­u­tive quar­ters, based on GDP in real terms.

How do we know if the lat­est GDP was a weak or strong num­ber? There is no easy an­swer to this ques­tion, as a higher num­ber is al­ways prefer­able.

An­a­lysts usu­ally like to put GDP per­for­mance into some kind of con­text by com­par­ing it with his­toric av­er­ages, and/or tar­gets as set out in gov­ern­ment plans, and/or the eco­nomic per­for­mance of ma­jor trad­ing part­ners and other coun­tries in the re­gion or at a sim­i­lar stage of de­vel­op­ment. The re­port is on the link http:// id=624

Pali Le­hohla, South Africa’s Statis­ti­cian-Gen­eral

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