Momentum Investments have released their research note titled Six out of 10 industries still below pre-pandemic levels in SA, prepared by the Momentum Macro Research Team.
Below is a summary of highlights from the team, as well as a downloadable PDF of the research paper.
Growth surprised firmly to the upside in the first quarter of the year. Real economic activity climbed 3% in year-on-year (y/y) terms, from 1.7% in the final quarter of 2021, coming in much higher than the Reuters market consensus forecast of 1.8%.
The economy expanded by 1.9% in quarter-on-quarter (q/q), seasonally adjusted (sa) terms, compared with the Reuters market consensus expectation of 1.2%.
Nevertheless, growth momentum should moderate in the second quarter as extensive flood damage in KwaZulu-Natal and a higher incidence of loadshedding curbed economic activity.
The latest gross domestic product (GDP) figures leave economic activity at the same level as prior to the pandemic. However, six out of the 10 South African (SA) industries are still operating below pre-pandemic levels. Real growth in the economy averaged a pedestrian 0.5% for the past five years and 1% for the last decade, which is significantly below the average rate of growth in the SA population (0.5%) for the same period. This suggests that citizens are becoming poorer on average.
The largest contributions to full-year growth, based on the production method, came from manufacturing, financial services and trade. Meanwhile, activity in the mining and construction sectors detracted from the full-year growth number.
Based on the expenditure method, the largest contributors to growth arose from household consumption and exports, while imports detracted the most.
In our view, higher global inflation eroding demand, aggressive lockdowns in China, an unwinding of accommodative monetary policy, fiscal consolidation, structurally high unemployment and local energy supply shortages continue to raise notable downside risks to local growth.
We expect growth to average 1.8% in 2022 and 2023. This is line with the May 2022 Reuters Econometer poll and broadly in line with the SA Reserve Bank’s projections of 1.7% and 1.9%, respectively.
Download the full report – click below: