South Africa’s Q1 GDP growth slows more than expected as power shortages weigh

By bne IntelliNews May 26, 2015

South Africa’s economy expanded by 1.3% q/q on a seasonally adjusted and annualised basis in the first quarter, slowing sharply from a 4.1% q/q growth in the preceding quarter and undershooting market expectations. Analysts polled by the Business Day predicted a 1.9% growth, while a Reuters poll suggested a 1.7% expansion.

The data, released by Statistics South Africa on May 26, shows that performance deteriorated in the manufacturing and mining industries, which powered growth in Q4, amid widespread electricity supply disruptions. This was partly offset by improved performance in the finance and trade sectors.

The manufacturing industry, which rebounded to a 9.5% growth in Q4 after three consecutive quarters of contraction affected by strikes, returned to the red zone, shrinking 2.4% in Q4. Growth in the mining sector remained strong on the back of higher coal and platinum output, but decelerated to 10.2% from 15.2%, and its contribution to the overall development fell to 0.8pp from 1.1pp.

On a brighter note, growth in the finance, real estate and business services industry accelerated to 3.8% from 3.5% wholesale, while the retail and motor trade, catering and accommodation industry expanded by 1.2% following a 0.3% contraction in Q4.

On an unadjusted y/y basis, the country’s real gross domestic product at market prices increased by 2.1% in Q1, speeding from a 1.3% growth in Q4. The best performing sectors were mining (+6.3%), agriculture (+6.2%), finance (+2.7%), and transport, storage and communication (+2.4%). On the opposite side, the electricity, gas and water industry contracted 0.3%.

The nominal GDP at market prices was ZAR965bn ($84bn) in Q1, by ZAR14bn less than in Q4. The largest industries, as measured by their nominal value added in Q1, were finance, real estate and business services with a share of 21.9%, general government services with 17.3%, the wholesale, retail and motor trade and catering and accommodation industry with 14.7%, and the manufacturing industry with 13%.

South Africa’s GDP growth is expected to strengthen from 1.5% in 2014 to around 2% this year, driven by improved labour relations, lower oil prices, and increasing exports, but constrained by electricity supply disruptions.

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