Hardhat Economic weekly review
According to Stats SA, real GDP declined by a much larger-than-expected 3.2% q-o-q (annualised) in 2019Q1. This marks the biggest contraction since the global financial crisis.
Compared with the first quarter of 2018, real GDP growth (seasonally adjusted) was basically flat at 0.1%. Measured from the production side, the GDP weakness was broadbased. Indeed, seven of the ten major sectors contracted in Q1.
As signalled by the monthly Stats SA data, the major contributors to the GDP decline were manufacturing, mining and the trade (retail, wholesale, hotels and restaurants) sectors. From the demand side, the theme of industry weakness is borne out by the sharp decline in exports during Q1, as well as the fifth consecutive quarter of contraction in fixed investment.
Furthermore, household consumption also contracted in 2019Q1, after a robust performance in 2018Q4.
Incoming data for Q2 also remains poor. According to Lightstone Auto, aggregate domestic new vehicle sales contracted by 5.7% y-o-y in May. This follows the marginal annual uptick of 0.7% registered in April. Passenger car sales contracted by 1.4% y-o-y. For the first two months of Q2, total new car sales are down almost 3% y-o-y. Export sales unexpectedly fell for the first time this year, declining by 8.8% y-o-y to 29 850 units. Despite the drop in May, year-to-date export sales are still 20.1% higher than the same period last year.
The National Association of Automobile Manufacturers of South Africa (NAAMSA) expects local car sales to remain weak due to low consumer and business confidence levels, as well as increasing pressure on the disposable income of households. The seasonally adjusted Absa PMI fell to 45.4 index points in May from 47.2 points in April. The decline brought the average
PMI for the first two months of the second quarter to 46.3 points, below the first quarter average of 47.1 points. This does not bode well for a recovery in manufacturing sector activity after output declined notably on a quarter-on-quarter basis in the first quarter.
The first tranche of economic data for 2019Q2 does not suggest a strong GDP recovery in the second quarter following the sharp contraction in Q1.