In the second quarter, the mining sector rebounded with growth of 14.4% – contributing a full 1.0 percentage point to GDP growth. This was thanks to the end of strikes at gold mines, but also due to a major rally in metal prices. Gold is currently trading at its highest level in six years, while platinum jumped from below $800/oz in June to above $930 currently.
The agriculture, forestry and fishing sector continued to shrink, however, and in the second quarter was 4.2% smaller than in the first. Construction was down 1.6%.
The economy was still only 0.9% bigger in the second quarter of 2019 than a year before. On Tuesday, Stats SA revised the first-quarter GDP number down from -3.2% to -3.1%.
Ahead of the release of the data on Tuesday morning, economists expected a “technical rebound” following the end of load shedding.
While SA avoided a recession, the outlook for the economy remains bleak. Investment levels remain subdued, and businesses are struggling. The latest Absa Purchasing Manager’s Index (PMI) data shows weaker levels of private sector activity, and a grim outlook on future business conditions. Also, South Africa recorded a shock R2.88bn trade deficit for July as imports exceed exports, the South African Revenue Service reported last week.
Accordingly, the latest growth number may not rule out a rate cut when the monetary policy committee meets from September 17 to 19.
In July, the committee cut the benchmark repo rate by 25 basis points to 6.5% from 6.75% – the first cut since March 2018.