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naamsa notes the GDP contraction numbers reported by Statistics SA on the 08th September 2020. According to statsSA, the South African economy recorded its third consecutive quarter of economic decline, with the Real Gross domestic product (GDP) falling by 16% between the first and second quarters of 2020, giving an annualised growth rate of -51%, Compared with 2019Q2, real GDP declined by 17.2%. The GDP numbers reflect a downward revision from the 1,8% quarter-on-quarter (q/q) decrease recorded in the first quarter of 2020.
Nearly all industries’ output contracted in the second quarter of 2020, with the exception of the agricultural sector which recorded a +15% increase to the quarterly GDP numbers. The construction sector was the biggest loser at 77%, with mining, manufacturing, transport, and retail, respectively falling by -73%, -75%, and -68%.
The dismal performance in 90% of the industries contribution to GDP was largely due to the particularly strict COVID19 lockdown, the pre-COVID19 double-dip recessions and long-term sluggish economy.
Amidst, the Quarterly Labour Force Survey (QLFS) statistics for the first three months of 2020 which showed a significant jump in the unemployment statistics (30,1%), the domestic consumerderived demand industries are likely to be impacted for at least the rest of 2020. We can expect the same contraction trends in other macroeconomic data such as the CPI, business confidence index and real effective exchange rate.
Although the manufacturing purchasing managers index (PMI) was up for the months of May and June, the manufacturing statistics on production output, sales and business expectation suggest a downward trend in the manufacturing sector will likely feature for most of 2020, especially on the side of small and medium manufacturing enterprises.
The automotive sector volatility is usually higher than the majority of the manufacturing sector and is known to move with the amplitude of business cycles, this is due to the sector’s demand-driven character among other issues, as we have seen in the industry’s sales performance reported for April-June 2020, the hard lockdowns period. In view of the close correlation between new vehicle sales and the economic growth rate, the second quarter reflected it worst performance on record declining year on year by 63,4 percent.
In August, the automotive sector aggregate domestic sale and aggregate exports fell by 26,3% and 46,9%, respectively, compared to the units sold in the same month last year (2019). The new vehicle market is expected to remain low for the remainder of the year due to the uncertainties relating to the economic impact of the coronavirus pandemic and as consumers and businesses continue to adapt to short-term budget pressures. This is important given the automotive sector strong linkages to other sectors of the economy, and the manufacturing sector’s value chain interdependency.