If the GDP measure is up on the previous three months, the economy is growing. If it is negative, the economy is contracting. Two consecutive three-month periods of contraction generally indicate that an economy is in recession.
South Africa recorded a negative growth rate of -1.2% in the first quarter of 2016, according to the latest figures released by Statistics South Africa.
The sharp contraction in mining is largely responsible for pushing economic growth into negative territory. Interestingly, if mining is excluded from the picture and non-mining growth is measured, the economy would actually have experienced growth of 0,5%.
Another reason for negative growth is the serious impact of adverse weather conditions on agricultural production, which has fallen by 14% since the fourth quarter of 2014.
The strongest performers in the first quarter were finance, real estate and business services, which increased by 1.9%.
For the first time since the 1940s, the calculation of GDP figures now falls entirely under the control of Statistics South Africa. Previously, the Reserve Bank was responsible for the expenditure side of the GDP figures, while Stats SA analysed the production figures.
Stats SA previously only published GDP production (GDPp) figures, a measure of the supply side of the economy (the extent to which industries drive economic output by producing goods and services). GDPp continues to be the headline growth rate.
The most recent GDP statistical release from Stats SA also included data on expenditure on gross domestic product (GDPe). GDPe is a measure of the demand side of the economy, the amount of money that is used to buy the goods and services that are produced. GDPe includes data on household and government spending, capital investment, and exports (minus imports).
Expenditure on GDP contracted by an 0.7 % in the first quarter.
Economists predict that South Africa’s economy will continue to struggle through 2016, but that it is expected to expand by 1% in 2017. Time will tell…
This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)