News that in the first quarter of the year, the economy actually contracted came as a negative blow to the economy.
Data from Statistics South Africa showed that the economy contracted by 2.2%. Still economists say they do not expect a recession in the second quarter or in the near future.
According to Economist Thabi Leoka, the country continues to see weak economic data, especially in the mining and manufacturing sector.
Manufacturing production decreased by 0.6%. While mining production fell by 2% in April – both on a month on month basis. However, Leoka says South Africa will have a clearer sense of how much weaker the second quarter will be once we have three months of data from these sectors.
Leoka has warned that South Africa’s growth forecast will have to be revised down should we continue to see weaker numbers.
“What we’re seeing currently is that it will take a lot coming from the negative 2.2 % that we saw in the first quarter. The rebound will have to be so strong for us to get a strong positive. I expect a slower pace of growth in the year on year numbers and maybe a slight pickup in the quarter on quarter numbers. But if we see slower than expected numbers and which then speaks to a recession then we are in trouble. I don’t expect that at the moment,” says Argon Asset Management Economist, Dr Thabi Leoka.
Consumers are feeling the pinch following consecutive fuel hikes and various tax increases. Leoka says higher fuel prices will have a negative effect on inflation and retail sales.
Still, FNB Investment Analyst, Shantel Marx says retail sales usually pick up in the third and fourth quarter from all the black Friday sales and festive season shopping.
Marx also does not expect South Africa to go into a recession. “The first quarter is always pretty weak; it was weaker than even the weakness that we were expecting. But we do anticipate slightly better growth in the second quarter, definitely on a quarter on quarter basis.”
Economists have forecast growth to be between 1.1 and 1.8%. Click below for more on the story: