South Africa’s economy expanded at a significantly stronger pace in the second quarter of the year, with growth measured at 0.8%, a sharp increase from the 0.1% growth recorded in the first quarter, according to the latest GDP data.
The production side of the economy was primarily driven by robust performances in the manufacturing, mining, and trade sectors. On the expenditure front, the positive momentum was attributed to stronger household consumption and a decrease in imports.
The 0.8% figure far exceeded analyst expectations, which had forecast a more modest 0.4% growth for the quarter, as noted by Mandisa Zavala, Head of Asset Allocation at AlexForbes Investments, who provided analysis on the data.
“This is double what analysts were expecting,” Zavala stated. “I don’t think anyone was estimating that our different sectors would contribute this much.” She highlighted that eight of the ten largest industries within the GDP basket showed positive growth, calling it a “very, very good number.”
A granular look at the data reveals manufacturing was a standout, growing by 1.8% and contributing 0.2 of a percentage point to the overall GDP growth. Zavala identified the automotive industry, petroleum chemicals, rubber, and plastic products as the key drivers within the sector.
“These are raw goods,” Zavala explained, “and these raw goods are key in many industries from a global and local perspective.” She pointed to recent developments with OPEC potentially increasing oil supply as a factor that could continue to benefit the petroleum sector and, by extension, consumers.
Despite the broad-based growth, not all sectors contributed positively. Construction activity decreased by 0.3%, with declines in both residential and non-residential building. Zavala contextualized this drop, noting the sector was coming off an exceptionally strong performance last year and is now showing signs of easing.
“The manner in which it is easing is showing that there’s definitely limited building activity,” she said, suggesting that lower interest rates are currently benefiting consumers more than spurring new business investment. She indicated the weakness in construction could reflect subdued business confidence and weak infrastructure investment.
The transport, storage, and communication industry also decreased, by 0.8%. Zavala attributed this decline to persistent logistical bottlenecks, specifically citing issues with Transnet rails and ports.
“There’s still some bottlenecks, port bottlenecks that are still being seen,” she said, adding that the ongoing global trade war is exacerbating these logistical challenges, which are not unique to South Africa. She expressed optimism that once Transnet is fully back online, the sector should recover.
The stronger-than-expected quarterly growth provides a positive signal for the South African economy, though experts caution that sustained performance across key sectors will be necessary to maintain this momentum through the end of the year.