STATS SA LOOKS AT THE SOUTH AFRICAN ECONOMY IN Q1, Q2 AND Q3, 2021

STATS SA LOOKS AT THE SOUTH AFRICAN ECONOMY IN Q1, Q2 AND Q3, 2021

– And how far we need to go to get to pre-COVID levels

This summary from http://www.statssa.gov.za provides an overview of how the economy did in the first and second quarters of 2021 – looking at which were the growth sectors and the industries which recorded positive gains - and how far we have to go to get to pre-Covid levels:

GDP RISES IN THE FIRST QUARTER OF 2021

The South African economy grewby 1,1% in the first quarter of2021 (January–March), translatinginto an annualised growth rate of4,6%. This follows a revised 1,4%(annualised: 5,8%) rise in realgross domestic product (GDP) inthe fourth quarter of 2020.

The finance, mining and trade industries were the main drivers of output on the production (supply) side of the economy, while household spending and changes in inventories helped spur growth on the expenditure (demand) side.

Despite this being the third consecutive quarter of positive growth, the South African economy is 2,7% smaller than it was in the first quarter of 2020.

FINANCE, MINING AND TRADE DRIVE PRODUCTION

Eight of the ten industries recorded positive gains in the first quarter of 2021,with finance, mining and trade making the most significant contributions.

Economic activity in the finance, real estate & business services industry increased at an annualised rate of 7,4%. This was mostly driven by property services (recording a rise in mortgage advances and bond registrations) and the banking sector (registering a rise in the number of credit extensions).

The mining industry had a positive quarter too with annualised growth of 18,1%, boosted by the production of platinum group metals, iron ore, gold and chromium. On the downside, miners in manganese ore, coal and diamonds recorded lower production figures in the first quarter.

Strong wholesale and retail activity underpinned growth in the trade industry. Wholesalers recorded increases in sales of petroleum, as well as in consumer electronics (most notably digital appliances and highend TVs). Retailers enjoyed a positive quarter, led by increases in sales of grocery products, healthcare services, vitamins and drugs.

Manufacturing output increased at an annualised rate of 1,6%, mostly driven by strong growth in the production of motor vehicles, parts and accessories and other transport equipment.

Manufactures in wood, paper and printing made a notable contribution too, supported by strong demand for packing materials and increased newspaper sales.

Load shedding and a decline in the supply of water contributed to the contraction in the electricity, gas & water supply industry. The agriculture, forestry & fishing industry also performed poorly in the first quarter in comparison with the previous quarter, dragged lower by weaker production figures for field crops and animal products.

HOUSEHOLDS SPEND MORE ON INSURANCE, RETAIL, CLOTHING AND FURNITURE

Stats SA also measures the expenditure side of GDP, providing an indication oftotal demand in the economy. This includes measures of household spending,government spending, investment spending (gross fixed capital formation andchanges in inventories), and net exports.

Household final consumption expenditure increased at an annualised rate of 4,7%in the first quarter, driven largely by miscellaneous goods & services, clothing &footwear, and furnishings, household equipment & maintenance.

Notable items in the ‘miscellaneous goods & services’ category that recorded growth include insurancerelated products, as well as retail goods such as electrical appliances, jewellery and other personal effects.

Clothing & footwear expenditure increased at an annualised rate of 22,2%.

Changes in inventories, particularly in the mining and trade industries, also spurred growth on the expenditure side of the economy.

How far to go before we return to pre-COVID levels? The COVID-19 pandemic and subsequent lockdown restrictions caused significant disruptions to the South African economy. Real GDP was R782 billion in the first quarter of 2020 (January–March). In the second quarter of 2020 (April–June), when lockdown restrictions were at their most stringent, economic output slumped to R652-billion

Economic activity has increased since then, in line with easing lockdown restrictions, with real GDP rising to R761-billion in the first quarter of 2021. This level is roughly comparable to what the economy was producing in the first quarter of 2016, and is 2,7% down from the R782-billion recorded in the first quarter of 2020.

QUARTER 2 – THE ECONOMY GREW BY 1.2%

The South African economy recordedits fourth consecutive quarter ofgrowth, expanding by 1.2% in thesecond quarter of 2021 (April–June).This followed a revised 1,0% rise inreal gross domestic product (GDP)in the first quarter (January–March).Despite the gains made over the lastfour quarters, the economy is 1,4%smaller than what it was before theCOVID-19 pandemic.

The results from this release cover the months of April, May and June. This means that the economic impact of the wave of severe economic disruption, protest action and violence in KwaZulu-Natal and Gauteng, which took place in July, will reflect in the third quarter GDP results that are due for release in December.

COVID-19: WE’RE NOT OUT OF THE WOODS YET

The sudden drop in economic activity during the second quarter of 2020, when lockdown restrictions were at their most severe, is evident in the chart below. In the first quarter of that year, real GDP was R1,147-billion, tumbling to R947-billion in the following quarter as the country barricaded itself against the pandemic.

The economy has seen consistentgrowth since that shock, but notenough to return to pre-COVID-19levels. Real GDP was R1,131-billionin the second quarter of 2021, 1,4%down from the reading in the firstquarter of 2020.

GDP PRODUCTION: COVID-19 RELATED ACTIVITIES SPUR GROWTH IN PERSONAL SERVICES

Six of the ten industries recorded a rise in production in the second quarter of 2021.The transport & communication, personal services and trade industries were themost significant drivers of growth in the second quarter, with transport& communication and agriculture recording the highest growth rates.

A surge in economic activity related to land transport and communications underpinned the 6,9% rise in transport, storage & communication.

Personal services, which includes health related activities, increased by 2,5% in the second quarter. This was on the back of increased economic activity related to the second phase of the national COVID-19 vaccination programme that kicked off on 17 May. Another contributor to growth in personal services was from medical schemes that recorded a rise in membership numbers.

Trade increased by 2,2%, driven by a rise in economic activity across all trade sectors.

EXPENDITURE ON GDP: EXPORTS AND HOUSEHOLD SPENDING SUPPORT GROWTH

The rise in trade activity in the second quarter is reflected on the demand (expenditure) side of the economy. Household final consumption expenditure increased by 0,5%, driven mostly by a rise in household spending on transport, food & non-alcoholic beverages, and health.

Exports increased by 4,0%, driven mostly by trade in mineralproducts, pearls, precious and semi-precious stones, preciousmetals and vehicles and other transport equipment.

THIRD QUARTER

The economy took a step back from the trajectory it was on in the second quarter, falling by 1.5% in the third quarter of 2021. Negative growth was seen in no less than six industries, Agriculture, forestry and fishing were the worst hit in the primary sector, seeing a 13.6% decrease as the country saw lower production of field crops and animal products. Mining and quarrying fared better, albeit with a decrease of only 0.9% in the third quarter.

The story does not get better when one moves onto the secondary sector. Manufacturing saw the biggest decline, dropping by 4.2%. This was driven mainly by a decrease in the production of motor vehicles, parts and accessories and other transport equipment, as eight of the ten manufacturing divisions reported negative growth.

Notable was the decline in food and beverages, basic iron and steel, non-ferrous metal products as well as metal products and machinery. Electricity, gas and water saw negative growth of 0.4%, and the construction industry a decrease of 0.5%, after decreases in nonresidential buildings and construction works were reported.

The tertiary sector did not come out unscathed, however it did see welcomed growth. Trade, catering and accommodation continued to feel the pressure of restrictions and health concerns, falling by 5.5% in the third quarter. Transport, storage and communication dropped 2.2%.

General government and personalservices both saw small gains of 0.4%and 0.5% respectively. Finance, realestate and business services led theway with third quarter growth of 1.2%

Decreased trade in vehicles andother transport equipment influencedthe 5.9% decrease in the export ofgoods and service, while importsdecreased by 2.8%, largely as aresult of a decrease in goods suchas mineral products; preparedfoodstuffs; base metals and articlesof base metals.

Household final consumptionexpenditure (HFCE) dropped as thirdquarter expenditure on transport,furnishings, recreation and restaurantsfell significantly. HFCE decreased by2.4%, contributing -1.6% percentagepoints to total growth. Expenditureon health and life insurance servicesindicates a sustained interest in healthand wellbeing amidst the pandemic.Government final consumptionexpenditure (GFCE), on the otherhand, increased by 0.1% in the thirdquarter as employee compensationrose in the third quarter.

Unless otherwise stated, growth ratesare quarter-on-quarter, seasonallyadjusted and in real (volume) terms.This is Stats SA’s first GDP releaseafter the completion of its latestbenchmarking and rebasing exercise.Note that Stats SA no longer usesthe annualised rate as the headlinegrowth rate.

Source: http://www.statssa.gov.za/?p=14423