Positive growth surprise but setback to follow in third quarter
22 Jul, 2022

Stats SA yesterday released the revised GDP estimates for the first quarter of the year and preliminary estimates for the second quarter of this year. The economy expanded 1.2% on a quarter on quarter (q/q) seasonally adjusted basis.

Please see below highlights from the note prepared by the Momentum Macro Research team.

Highlights:

The change in base of comparison led to a large degree of uncertainty around growth leading up to the release of the second quarter gross domestic product (GDP) figure.
Growth bounced 19.3% in year-on-year (y/y) terms in the second quarter of 2021 from negative 2.6% in the first quarter. Growth surprised to the upside with surveyed analysts, participating in the Reuters Econometer for August, expecting a 18.8% y/y rise.
The economy expanded 1.2% on a quarter on quarter (q/q) seasonally adjusted basis. Statistics South Africa (Stats SA) no longer reports growth data on an annualised basis given the distortions created by large one-off growth shocks.
The largest contributions to second quarter growth, based on the production method, came from transport, storage and communication, as well as personal services, which underperformed in the previous quarter.
Based on the expenditure method, the largest contributions to growth arose from exports, while the dip in inventories detracted the most.
We expect the additional restrictions imposed during the third wave of COVID-19 infections and riots, predominantly seen in Gauteng and KwaZulu-Natal, to lead to a sharp slowdown in growth in the third quarter before the economy stages a firm recovery in the final quarter of the year.
Although medical experts are anticipating a fourth wave of COVID-19 infections to hit the economy from around November 2021, they suggest that higher natural rate of infections and further progress on the vaccination rollout plan may result in a lower peak of hospitalisations. If this prediction materialises, it may ease the burden on government to follow up very stringent lockdown rules.

ENDS

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