Cape Town - The rand rallied on Tuesday on the back of better emerging market sentiment and after news that South Africa has avoided a technical recession with better-than-expected growth numbers for the second quarter of 2016.
Statistics South Africa announced on Tuesday that GDP expanded by 3.3% quarter-on-quarter (q/q). This compares with the 2.8% expected, and following the 1.2% contraction in the previous quarter. The year-on-year growth was 0.6%.
By 12:46 the rand was trading at R14.17, more than 20c firmer from its overnight close of R14.38 in New York.
South African data in the past couple of months has been fairly decent, and this was certainly reflected in the GDP number, said TreasuryOne.
"We are still a miles away from where we want to be, but there is some light on the horizon."
"This is good news all round as a technical recession was avoided. The Easter weekend falling in March no doubt helped the second quarter and we may actually get positive growth this year," economist Mike Schüssler told Fin24.
Mike de Beer, who announced the growth stats on behalf of Statistician General Pali Lehohla, said for the first time in a long while there was a positive growth rate in all three of the largest sectors. The primary sector showed a growth rate of 8.8% with mining up by 11.8%, the secondary sector grew by 5.3% with manufacturing up 8.15%, and the tertiary sector showed a growth rate of 2% with finance and transport both up 2.9%.
De Beer indicated that manufacturing, mining and quarrying made the biggest contribution to GDP growth. Manufacturing rose by 8.1%; this was largely due to higher production in petroleum and chemical products, rubber and plastic products and motor vehicles, parts and accessories and other transport equipment.
He said nominal GDP is estimated at just more than R1trn. The finance sector is the biggest contributor followed by government, trade and manufacturing. About R1 in every R5 comes from the financial sector.
Real expenditure on GDP increased by 3.4% in the second quarter on a q/q basis. It was mostly export driven. Government consumption expenditure lifted by 1.3%. There were declines in gross fixed capital formation and imports of goods and services.
Household final consumption expenditure went up by 1% q/q. The strongest growth came from miscellaneous goods and services (8.9%). The growth in consumption expenditure was mostly on the services side.
Government final consumption expenditure increased by 1.3% q/q and gross fixed capital formation fell by 4.6% q/q. Construction works declined by 14.4% and machinery and other equipment by 13%.
Exports increased by just over 18% in the second quarter, while imports dropped by 5.1% q/q.
De Beer said the growth rate tells the same story as the last three or four years in terms of GDP growth.
He said that means the average South African is still poorer than a year or even three years ago.
"That is the real problem: we are not keeping pace with our population growth," he cautioned.Read Fin24's top stories trending on Twitter: Fin24’s top stories