South Africa: Economic activity declines in Q2
Underlying momentum weakened in the second quarter of 2022, as GDP dropped 0.7% on a seasonally adjusted quarter-on-quarter (s.a. qoq) basis, contrasting with the 1.7% expansion seen in the first quarter. The reading was marginally better than the 0.8% contraction markets anticipated. On an annual basis, economic growth moderated to 0.2% in Q2, following the previous period’s 2.7% increase. Q2’s reading marked the weakest reading since Q1 2021, although this was chiefly due to an unfavorable base effect, as the economy expanded nearly 20% in Q2 2021. The South African economy remains smaller in than before the pandemic.
The quarterly downturn was the result of Aprils devastating floods in the KwaZulu-Natal province—the countrys second largest in terms of GDP—and severe power outages throughout the period. This drove a broad-based moderation in domestic demand. Private consumption growth halved, coming in at 0.6% in Q2 (Q1: +1.2% s.a. qoq). An improvement in the unemployment rate (Q2: 33.9%; Q1: 34.5%) likely prevented a sharper slowdown. Additionally, fixed investment growth moderated to 0.5% in Q2, from 3.4% in the prior quarter. Lastly, public consumption dropped at the sharpest pace since Q3 2021, contracting 0.7% (Q1: +1.1% s.a. qoq).
On the external front, exports of goods and services growth slowed to 0.3% in Q2 (Q1: +3.8% s.a. qoq). Conversely, growth in imports of goods and services picked up to 5.6% in Q2 (Q1: +5.1% s.a. qoq). Consequently, the external sector subtracted 1.4 percentage points from overall growth, compared to the previous quarters 0.3 percentage point detraction.