South Africa: GDP rebound beats expectations in Q3
The economy rebounded in the third quarter of 2022. Underlying momentum rallied in Q3 and expanded at a stronger-than-expected rate of 1.6% on a seasonally adjusted quarter-on-quarter basis. The upturn, which contrasted the prior quarter’s 0.7% contraction, surprised markets on the upside. The return to growth reflected the recovery from the floods that devastated the KwaZulu-Natal province—the country’s second-largest contributor to GDP—in the second quarter.
Domestically, the quarterly improvement was driven by the rebound in public consumption, which grew 0.5% in Q3 (Q2: -0.8% s.a. qoq). Meanwhile, fixed investment growth waned to 0.3%, marking the weakest reading since Q3 2021 (Q2: +0.4% s.a. qoq). Less positively, household spending contracted 0.3% (Q2: +0.6% s.a. qoq), marking the worst result in a year. The improvement in the unemployment rate (Q3: 32.9%; Q2: 33.9%) was not enough to shield consumers from elevated inflation (Q3: 7.7%; Q2: 6.6%) but likely prevented a sharper contraction in spending.
On the external front, exports of goods and services rebounded, growing 4.2% seasonally adjusted quarter on quarter in Q3 (Q2: -0.2% s.a. qoq), which marked the best reading since Q4 2021. Conversely, the growth of imports of goods and services softened to 0.6% in Q3 (Q2: +5.5% s.a. qoq). Consequently, the external sector contributed 0.9 percentage points to overall growth, contrasting the prior period’s 1.5 percentage point detraction.
On an annual basis, economic growth gathered pace, rising to 4.1% in Q3, from the previous period’s 0.2%. Q3’s reading marked the best result since Q2 2021. The South African economy is now larger than it was before the pandemic.