South Africa: Growth accelerates slightly in Q2, following national accounts rebase
Economic momentum strengthened in the second quarter, with GDP growth accelerating to 1.2% in seasonally-adjusted quarter-on-quarter terms from the 1.0% expansion logged in Q1. With the release of Q2’s data, Statistics South Africa rebased national accounts with 2015 prices, from 2010 previously. Meanwhile, on an annual basis, GDP rebounded strongly in Q2, growing 19.4% following Q1’s 2.5% decline. The reading was largely owing to a low base effect, as GDP plunged in Q2 2020 due to the effects of the pandemic. That said, the result still marked the strongest growth rate since at least Q1 1994.
Domestically, fixed investment bounced back to growth in the quarter, logging a 0.9% increase and swinging from Q1’s 3.1% contraction. Moreover, government spending declined at a more moderate pace of 0.1% in Q2, following Q1’s 0.4% fall. However, household consumption growth ebbed to 0.5% in seasonally-adjusted quarter-on-quarter terms in the second quarter, from 1.0% in Q1, likely due to the increase in the unemployment rate (Q2: 34.4%; Q1: 32.6%).
Turning to the external sector, the expansion in exports of goods and services accelerated to 4.0%, up from the prior quarter’s 1.0% rise, likely reflecting the easing of Covid-19 restrictions globally. Conversely, growth in imports of goods and services slowed to 0.4% in the period (Q1: +6.5% s.a. qoq). Consequently, the external sector contributed 0.8 percentage points to the overall reading in Q2, swinging from Q1’s 1.4 percentage-point subtraction.
Moving forward, momentum could have slowed in Q3, as both retail sales and manufacturing production contracted at sharper rates in monthly terms in July. Moreover, business sentiment ebbed in the same month and the private sector PMI remained in contractionary territory in the first two months of the quarter. Lastly, growth in both merchandise exports and imports slowed in annual terms in July.