Shocking gross domestic product decrease in third quarter
South Africa’s GDP decreased more than economists expected. Economists expected it to contract by only 0.1%.
There was a shocking decrease in the country’s gross domestic product in the third quarter, with eight of the 10 manufacturing divisions reporting negative growth rates, showing that the South African economy was not growing.
According to Statistics SA, South Africa’s gross domestic product (GDP) decreased 0.2% in the third quarter of 2023. GDP weakened after two consecutive quarters of growth, with the contributions to the performance of the economy evenly spread between the industries on the production side of the economy.
Industries with decreased domestic product growth
The agriculture, forestry and fishing industry decreased 9.6%, contributing -0.3 of a percentage point to the negative GDP growth, primarily due to decreased economic activities reported for field crops, animal products and horticulture products.
The agriculture industry encountered several headwinds in the third quarter, including the outbreak of avian flu and the floods in Western Cape.
The manufacturing industry decreased 1.3%, contributing -0.1 of a percentage point due to weaker demand. The food and beverages and petroleum and chemical divisions were the biggest drags on manufacturing growth and the outbreak of avian flu also had a negative impact, affecting the production of chicken-related products.
The construction industry decreased 2.8%, contributing -0.1 of a percentage point, with decreases reported for residential buildings, non-residential buildings and construction works. This was the second consecutive quarter of decline.
The mining and quarrying industry decreased 1.1%, with decreased economic activities reported for platinum group metals (PGMs), gold, other metallic minerals and manganese ore.
According to Statistics SA, the weaker activity from agriculture and manufacturing had a knock-on effect on wholesale trade, contributing to a 0.2% decline in the trade, catering and accommodation industry.
Motor trade and restaurants, catering and fast-food were also weaker, but tourist accommodation and retail trade were stronger, although not enough to lift the industry into positive territory.
The trade, catering and accommodation industry decreased 0.2%, with decreased economic activities reported for wholesale trade, motor trade and food and beverages.
Contributors to GDP growth
On a positive note, the largest contributors to GDP growth were finance, real estate and business services, personal services and transport, storage and communication. Transport, storage and communication expanded 0.9%, supported by increased economic activity in land and air transport, transport support services and communications.
Road freight was the exception, recording a decline in the quarter.
After five consecutive quarters of decline, the electricity, gas and water supply industry grew 0.2% thanks to increased electricity generation. The country also experienced less intense load shedding in the third quarter, racking up only 20 days of stage 5 and stage 6 load shedding.
This is lower than the 46 days recorded in the second quarter, according to The Outlier and EskomSePush. However, water consumption was down in the second quarter due to water restrictions in various municipalities.
Consumer and government spending
Stats SA also measures the expenditure side of GDP, providing an indication of total demand in the economy. This includes measures of government consumption, household consumption, investment (gross fixed capital formation and changes in inventories), and net exports. In the third quarter, expenditure on real GDP decreased 0.1% in the third quarter.
Household final consumption expenditure decreased 0.3% in the third quarter, contributing -0.2 of a percentage point to the total negative growth. Consumers spent less on durable goods, non-durable goods and services.
They primarily spent less on transport (-1.6% and contributing -0.2 of a percentage point), housing, water, electricity, gas and other fuels (-0.8% and contributing -0.1 of a percentage point), other (-0.7% and contributing -0.1 of a percentage point) and recreation and culture (-1.1% and contributing -0.1 of a percentage point).
However, consumers spent more on clothing and footwear, restaurants and hotels, health, education and food and non-alcoholic beverages.
Final consumption expenditure by general government increased 0.3% in the third quarter, mainly driven by an increase in the salaries of public servants.
Expenditure on gross domestic product
Expenditure on gross domestic product is the expenditure on final goods and services produced within the borders of a country and includes spending on exports but excludes spending on imports. It indicates the value of the production of final goods and services.
The data shows that total gross fixed capital formation or investment decreased 3.4% in the third quarter. The main negative contributors to the decrease were
- machinery and other equipment (-3.2% and contributing -1.3 percentage points)
- transport equipment (-6.7% and contributing -0.7 of a percentage point)
- other assets (-5.7% and contributing -0.6 of a percentage point) and
- construction works (-3.1% and contributing -0.5 of a percentage point).
There was a R44,5 billion drawdown of inventories, which means that less stock was kept in the third quarter, with large decreases in manufacturing, mining and quarrying and transport, storage and communication.
Net exports, the difference between the value of imports and exports, contributed negatively to expenditure on GDP in the third quarter. Exports of goods and services increased 0.6%, largely thanks to increased trade in vehicles and transport equipment, as well as pearls, precious and semi-precious stones, precious metals and vegetables.
Imports of goods and services decreased 8.6%, largely due to decreased trade in machinery and electrical equipment, chemical products, artificial resins and plastics, base metals and articles of base metals, vegetable products and vehicles and transport equipment.