SA GDP contracts: Stable electricity supply boosts energy-intensive mining and manufacturing in Q3 2024, while agriculture drags growth lower
In contrast to the general expectations of modest growth, the South African economy contracted by 0.3% q/q during the third quarter of 2024, following an expansion of 0.3% q/q in the second quarter. Despite a marked improvement in electricity supply, South Africa’s economy remains under pressure, especially as households continue languishing under the strain of the mostly elevated cost of living and household over-indebtedness.
Therefore, against the backdrop of overall lackluster economic activity in 2024 so far, including the GDP decline in Q3-2024, the overall (unadjusted) GDP growth for the first three quarters of the current year came in only 0.4% higher than the corresponding period in 2023. At the same time, real GDP amounted to R1 161 billion in Q3 2024, reflecting a decline from the record high achieved in the previous quarter.
Notwithstanding the overall contraction in activity, only four out of the ten main economic sectors declined during the quarter. The highly volatile agriculture, which makes up 2% (Q3 2024) of the total economy’s value added, was the worst performing sector as it registered a deep contraction of -28.8% q/q, subtracting 0.7 percentage points from overall GDP. The industry faced significant challenges in the third quarter, with drought severely impacting the production of field crops such as maize, soybeans, wheat, and sunflower.
Finance emerged as the largest positive contributor as it grew by 1.3%, bolstered by growth in banking, insurance, real estate, and other business services. Mining increased by 1.2%, receiving a boost from stronger manganese and chromium ore production, while iron, steel, and machinery production fueled much of the momentum in manufacturing, which rose by 0.5%.
Suggesting a somewhat better economic outcome during the final quarter of the year, the South African Reserve Bank’s leading indicator index increased by 0.9% on a monthly basis in September 2024.
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