Economy on the brink of Recession

Recession is briefly described as a contraction of GDP over at least two consecutive quarters. After Nigeria has entered Recession, now South Africa is facing a similar fate as a fall in mining and manufacturing production in the final quarter of 2016 pulled South African economic growth into negative territory, according to preliminary figures of gross domestic product (GDP) released by Stats SA. South Africa’s economy contracted by 0,3% quarter-on-quarter (seasonally adjusted and annualised). Thus this is the first of two consecutive quarters to confirm a recession!

The mining industry’s 11,5%1 drop in production was the main contributor to the economy’s slowdown, brought about by a fall in production of coal, gold and ‘other’ metal ores, such as platinum and iron ore

Adding to the slowdown was manufacturing, contracting by 3,1% in the same quarter. This was largely a result of slower production in manufacturing sectors related to food and beverages, petroleum and chemicals, and transport equipment.

All industries in the tertiary sector recorded positive growth rates, led by an increase of 2,6% in transport and communication services and an increase of 2,1% in trade, catering and accommodation services.

Expenditure on GDP decreased by 0,1% in the fourth quarter of 2016 following an increase of 0,4% in the third quarter. There were increases in consumption expenditure (household and government) as well as fixed investment, but a decline in inventories pulled the total growth rate into negative territory. Large inventory drawdowns were reported for the mining industry (lower production but higher exports of precious metals and mineral products); these were partly offset by inventory build-up in the manufacturing sector.

Other quick GDP facts are:

* The unadjusted real GDP increased by 0,7% year-on-year in the fourth quarter of 2016.
* The South African economy grew by 0,3% in 2016 compared with 2015.
* All provinces recorded positive economic growth rates in 2015 compared with 2014, with the exception of Free State and Mpumalanga which both experienced a decline in economic activity.
* Nominal GDP in the fourth quarter was estimated at R1,1 trillion.

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