Contraction in Q3 Signals Broad Weakness
The South African economy faced a contraction of 0.2% in the third quarter, slightly worse than the anticipated 0.1% contraction predicted by analysts. PwC senior economist Christie Viljoen noted that compared to the same quarter in 2022, the economy saw a 0.7% reduction, marking the first negative figure since Q1 2021. This decline points to widespread weakness, with six out of the ten industries experiencing a year-on-year decline in activity.
“This signalled broad weakness in the economy, with six out of the 10 industries recorded a year-on-year decline in activity.”
Industry-Specific Declines
Several industries contributed to the economic downturn. The agriculture, forestry, and fishing sector reported a 9.6% decline in Q3, attributed to reduced economic activities in field crops, animal products, and horticulture. Manufacturing saw a 1.3% drop, and the construction industry experienced a 2.8% contraction.
Power Shortages and Economic Impact
While the intensity of power shortages decreased by 18.8% compared to the second quarter, a substantial 5,942GW of electricity was shed during Q3, leading to 121 more hours of load shedding and increased time at Stages 1 to 4.
Household Consumption and Capital Formation
Household final consumption expenditure dropped by 0.3% in Q3, with reduced spending on transport, housing, water, electricity, gas, and other fuels. The total gross fixed capital formation declined by 3.4%, with machinery, other equipment, and transport equipment being significant contributors.
Exports and Imports Dynamics
Exports of goods and services increased by 0.6%, while imports witnessed an 8.6% decline.
Outlook for 2024
Looking ahead to 2024, challenges such as the power crisis, logistical constraints, weaker global demand, and lower international commodity prices are expected to continue undermining production across sectors. The cumulative 475-basis point hike in interest rates is anticipated to strain household finances, impacting consumer confidence and demand, ultimately resulting in modest growth.
