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The South African economy slipped into recession during the second quarter of 2018, shrinking by 0,7% quarter-on-quarter (seasonally adjusted and annualised). This followed a revised 2,6% contraction in the first quarter of 2018.

The widely recognised indicator of recession is two (or more) consecutive quarters of negative growth (real GDP quarter-on-quarter). South Africa experienced its last recession during the 2008–2009 global financial crisis with three consecutive quarters of economic decline.

The 0,7% downturn in the second quarter of 2018 was a result of a fall-off in activity in the agriculture, transport, trade, government and manufacturing industries.

Agriculture production fell by 29,2%1 in the second quarter of 2018, following a 33,6% slump in the first quarter. This was largely driven by a decline in the production of field crops and horticultural products. Continued drought conditions in Western Cape and a severe hailstorm in Mpumalanga, resulting in extensive crop damage, also placed additional pressure on production in the second quarter.

The transport industry contracted by 4,9%, largely a result of decreased activity in both land and air transport. Industrial action within the industry, combined with a decline in freight transport, contributed to the slowdown.

The trade industry experienced its second consecutive quarter of negative growth, falling by 1,9%. Subdued sales in both motor and retail trade contributed to the decline. South African household consumption expenditure fell in the second quarter of 2018 compared with the first quarter of 2018, in line with the fall in retail trade sales. Households spent less on products such as transport, food, beverages and clothing.

Government activity decreased by 0,5%, largely as a result of falling employment numbers in the civil service.

Manufacturing was the third industry to record a second consecutive quarter of negative growth, following in the footsteps of agriculture and trade. Manufacturing activity fell by 0,3%, driven by a fall in the production of electrical machinery, transport equipment (including motor vehicles), and products within the furniture and ‘other’ manufacturing division.

Mining, construction, electricity, finance and personal services experienced positive growth, but not enough to lift overall economic growth out of negative territory. Mining’s growth rate of 4,9% was largely spurred on by a rise in the production of platinum group metals, copper and nickel. Construction activity increased by 2,3%, driven by a rise in non-residential buildings and construction work activities.

 

For more information, download the latest GDP report and media presentation here.

1 Unless otherwise stated, growth rates are quarter-on-quarter, seasonally adjusted and annualised, and in real (volume) terms.

Similar articles are available on the Stats SA website and can be accessed here.

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Source STATS SA

According to the figures from the Quarterly Employment Statistics (QES) survey, released by Statistics South Africa, the total number of jobs reported in the second quarter showed a decrease of 69 000, bringing the total number of persons employed in the formal non-agricultural sector of South Africa to 9 748 000.

Job losses were reported in the community services industry, with 67 000 jobs shed. These jobs were mainly casual work and were observed in the extra-budgetary account sub-sector that employed staff due to next year’s national election registration drive.

The mining industry continued to shed jobs for the fourth consecutive quarter with 2 000 jobs lost in the second quarter of 2018, while the manufacturing industry lost 13 000 jobs. There was a slight decrease in the transport industry, with 2 000 jobs shed. Moderate gains were reported in the trade and business services industry with the adding of 7 000 jobs each, followed by the construction industry with a slight increase of 1 000 jobs. The job level in the electricity industry remained unchanged in the reference quarter.

Year-on-year, formal sector jobs rose by 13 000 in the second quarter of 2018 compared with the same period of 2017.

There was a decrease of R5 billion in gross earnings from the previous quarter. The total amount of gross earnings paid for the quarter was R627 billion. The decreases in earnings were led by the business services industry with R12 billion. This was followed by the mining industry with R699 million.

Increases in earnings were reported by the community services industry with R3,5 billion. This increase was followed by the transport industry with R2,3 billion; construction industry with R1,1 billion; manufacturing industry with R570 million; trade industry with R307 million; and electricity industry with R94 million.

Average monthly earnings were measured at R20 176 in the formal non-agricultural sector of the economy in May 2018. This is an increase of 1,6% compared with February 2018. A year-on-year increase of 3,7% was reported from R19 444 in May 2017 to R20 176 in May this year.

There was a year-on-year rise in gross earnings by 4,5% from R600 billion in the June 2017 quarter to R627 billion in the June 2018 quarter.

For more information, download the Quarterly Employment Statistics, Q2:2018 report here.

Source STATS SA

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Source SARS