Shock 3.2% contraction in GDP in first quarter

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SA’s economy contracted by 3.2% in the first quarter of 2019‚ the worst drop since the same period in 2009‚ in the wake of the global financial crisis.

The manufacturing sector contributed most to the contraction‚ falling 8.8% quarter on quarter‚ statistician-general Risenga Maluleke said on Tuesday.

However‚ activity fell in almost every sector of the economy.

The rand‚ which was at R14.46/$ immediately before the announcement‚ fell to R14.61 within minutes‚ a decline of over 1% on the day. On the JSE‚ banks fell sharply. Standard Bank was 3.9% down‚ Rand Merchant Investment Holdings and Absa fell 3.4%‚ and FirstRand 3.2%.

SA’s GDP growth in the first quarter was 0% year on year‚ far worse than anticipated.

The consensus according to macroeconomics website Trading Economics was for SA’s GDP to contract 1.7% quarter on quarter‚ but grow 0.7% year on year.

The plunge wiped R56bn off SA’s nominal GDP‚ putting it at R1.2-trillion at the end of March.

“This is the biggest decline in about a decade‚ or since the [2008] financial crisis‚” Maluleke said.

SA’s mining industry contracted 10.8% from the last three months of 2018‚ while final household consumption expenditure fell 0.8%.

Government spending picked up 1.3%.

The dismal GDP print underscores fears that a slowing global economy and lack of domestic business confidence has undercut SA’s expected economic recovery in 2019. The numbers are likely to reinforce expectations that the Reserve Bank will move to cut interest rates‚ possibly at its next meeting in July.

Load-shedding‚ slow wage growth and higher income taxes had all been factors economists had cited as reasons for depressed economic activity.

Exports fell 26.4% in the quarter‚ mainly due to exports of metals and vehicles‚ while imports fell 4.8%.

The agriculture‚ forestry and fishery sector contracted most — 13.2% — but only contributed 0.3 percentage points to the 3.2% fall. Manufacturing contributed 1.1 percentage points of this figure‚ and mining 0.8 percentage points.

Within the household expenditure category‚ clothing and footwear declined 12.7%‚ transport 3.1% and recreation 4%.

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