SA economy looking 'dramatically dismal' in first quarter - Mike Schüssler

The performance of the SA economy in the first quarter of the year is looking "dramatically dismal", says economist Mike Schüssler.

Schüssler said that, on a seasonally adjusted and annualised basis, he expects first quarter data could show a "massive decline" in growth overall. This may make it difficult for SA to achieve over 1% economic growth for 2019. 

Schüssler expects SA's GDP to decline in the first quarter, probably by between 1.2% and 2.2%. He told Fin24 on Friday that while this was a broad range, more data for the first quarter still needed to be released.

Down, down, down

He said available first quarter data indicates that growth in the electricity production sector - which accounts for about 2% of SA's economy - is down 8.2%, while mining is down a "very negative" 15.9%.

Manufacturing - which makes up about 14% of SA's GDP - is down 11.4%, while passenger car sales are down 31.6%, which he said was a "concern". 

He expects that the financial sector should be positive, however, as well as government sector growth. Both are bigger than mining or manufacturing. "The big critical element would be what happens to data in construction, wholesale and retail," he said, adding that load shedding probably contributed to the decline in mining and manufacturing.

South Africa fell into a technical recession in the first half of 2018, before the economy gained pace in the second half of the year. A technical recession describes two successive quarters of negative economic growth. 

Schüssler said data for April - the first month of the second quarter - had shown more positive numbers. For this reason he does not expect the SA economy to technically go into a recession after the end of the second quarter, although he said it was difficult to make firm predictions. 

Earlier in the month NKC African Economics, a provider of economic research, estimated that South Africa's economy may have contracted in the first quarter of the year, saying low confidence levels were depressing expenditure and investment in the economy.

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