Analysis: 2012 Q4 GDP figures

According to the latest StatsSA release, the South African economy grew by 2.1% quarter-on-quarter in the final quarter of 2012, and by 2.5% for the entire calendar year. The quarter-on-quarter growth was higher than the consensus forecast of 1.6%, with the manufacturing and tertiary sectors providing solid, if unexceptional, growth.

The 2.5% growth for the year is in line with the (downwardly revised) forecasts from the treasury, but growth at these levels will do little to make a dent in unemployment. Plus, there are no positive growth trends in the various sectors – at best the evidence is ambiguous and contradictory.

It’s worth bearing in mind (and it’s been remarked on before) that the quarter-on-quarter growth rates are generally more volatile than year-on-year growth. This isn’t so much pronounced in the overall GDP growth – particularly when it’s low and relatively steady, as it has been for a year or so – but it is more noticeable in some of the sectors and subsectors.

The two sectors where the volatility effect is probably most pronounced are the mining and the manufacturing sectors. The former has seen increasing volatility in growth since 2004, including large swings from positive into negative growth territory (or vice versa). The latter has been less erratic, although volatility has increased over the last three years.

The sector with the strongest growth was the agricultural sector, expanding 10.0% quarter-on-quarter. It’s the second-smallest sector in the economy, and growth is highly cyclical. The second-best performing sector was the manufacturing sector, growing at 5.0% for the quarter.

The sector had two good quarters bookending a poor performance in the middle of the year. The sector still faces weak demand for many of its outputs, both at home and in export markets. It’s not clear at this point whether the quarter’s growth can be sustained in the new year.

Growth in the finance, real estate and business services sector was 2.9% quarter-on-quarter, which made it the third-best performing sector of the quarter. Growth in the sector, and in the other tertiary sectors, has been pedestrian this year and indeed last year too. If it hasn’t been treading water in these sectors it’s been on a declining trend (as in the wholesale, retail and trade sector).

That remains the bad-news story of the economy, as the tertiary sectors comprise some two-thirds of SA Inc. Throw in the misfiring manufacturing sector and the figure approaches 90% of total output. The mining sector remains in crisis, and while its direct effect on the economy (in terms of economic value-add) is small, its linkages with the other sectors and its negative weighing on everything from investor confidence to the balance of trade multiply its impact.

Any upward revisions by the treasury during Wednesday’s budget speech would have to be based on more faith than proof. It’s likelier that there will be a small downward revision in GDP growth forecasts over the medium term.

There ought to be some clarity on the youth wage subsidy, and possibly one or two other microeconomic reforms aimed at pushing growth and employment higher, but few people are expecting bold changes from the minister. A conservative budget is once again likely, which is a pity, because the economy needs all the help it can get. DM

Read more:

• The original report

Photo: New South African bank notes featuring an image of former South African President Nelson Mandela are displayed at an office in Johannesburg January 17, 2013. REUTERS/Siphiwe Sibeko