GDP slowly growing again on its way to an annual Growth of 1.5%

South Africa’s gross domestic product (GDP) grew by 1.4% quarter-on-quarter (q/q) annualised in 3Q 2014, after increasing by 0.5% q/q in 2Q.

The drivers of the rebound were: agriculture (+8.2% q/q), trade and hospitality (+3.4% q/q) and finance and business services (+2.4% q/q). Mining also staged an encouraging recovery from a 3.1% q/q contraction in 2Q, to achieve growth of 1.6% q/q in 3Q. On the downside, manufacturing (-3.4% q/q) and utilities (-1.1% q/q) continued to see output decline.

The manufacturing weakness was largely due to striking in the metals and engineering segment. Meanwhile, strength in agriculture was due to a good crop harvest. The recovery in the trade sector was broad based, but it is coming off a low base and is likely driven by the return of striking workers in the platinum industry and the resulting wage gains (following large wage losses during the strike).

The business and finance sector was boosted by strong financial market returns in 3Q. On a year-on-year (y/y) basis GDP grew by 1.4% in 3Q. For the three quarters of 2014 as a whole GDP has grown by 1.5% y/y. We expect that 4Q GDP will pick up slightly to record growth of 1.5% y/y and as such full year growth is expected to be 1.5%. In 2015 the economy is expected to perform slightly better in anticipation of fewer strike days to be lost (2014 saw the longest strike in SA’s history), the introduction of additional power supply from Medupi as well as an improvement in the global economy.

FNB forecasts a GDP growth rate of 2.4% in 2015.

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