Though second-quarter economic growth was slightly below the market’s forecast, the 0.4% increase in activity could signal a “turning point”.
Economists said the continued absence of load-shedding and more positive sentiment after the formation of the government of national unity (GNU) were likely to contribute to stronger growth in the second half of the year, contributing to 1% average growth in 2024.
Stats SA published GDP data for the second quarter on Tuesday, saying that growth came from recoveries in finance, domestic trade, government and personal services.
First-quarter growth was revised to 0% from a contraction of 0.1% previously reported.
The finance, real estate and business services segment increased 1.3% in the second quarter to contribute 0.3 percentage point.
“The electricity, gas and water industry increased by 3.1% contributing 0.1 percentage points. This was largely due to increases in electricity production and consumption, as well as water consumption,” said Stats SA.
The boost in growth was driven by renewed domestic spending as lower inflation lifted confidence, household purchasing power and real incomes, said Nedbank economists.
“The figures confirm that the worst of the economic downturn is probably behind us. We expect the recovery to gain moderate traction over the final stretch of the year before strengthening and broadening throughout 2025 and 2026. The boost will likely come from continued improvements in consumer demand as inflation falls further and interest rates start to decline,” they said.
Broad-based recovery in most sectors followed weakness in the first quarter and was supported by an absence of load-shedding and some improvement in the logistics sector, said Elna Moolman, head of SA macroeconomic research at Standard Bank.
“Important political developments” such as the formation of the GNU and the announcement of new cabinet appointments have helped improve sentiment, she said. “We expect to see further traction for growth in coming quarters and ultimately higher growth.”
These sentiments were echoed by the chief economist of the Bureau for Economic Research (BER), Lisette IJssel de Schepper, who said that despite the second-quarter print coming in below their July forecast and “signals of downside risk”, they decided to keep their forecast for average growth for the year at 1% for now.
“Assuming no further revisions to the quarter one and two data, an average of 0.5% quarter-on-quarter growth in [the next two quarters] is required to achieve our 1% forecast.
“We believe this is attainable,” she said.
The economy grew by only 0.7% in 2023.
One of the warning signs for future growth is in the expenditure breakdown of GDP, which showed a contraction in gross fixed capital formation. This was the fourth straight quarter that fixed investment contracted on a quarterly basis, declining by 1.4% in quarter two, with the biggest drag coming from private sector investment.
“The persistent contraction in fixed investment casts a shadow over the results,” said Cobus de Bruyn of Nedbank Commercial Banking.
Nedbank economists said they expected fixed investment to turn the corner early next year, driven by a revival in renewable energy projects, a more supportive international and domestic business cycle, and further improvements in structural reforms.
Update: September 3 2024
This story has been updated with new information.
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