Advertise with

Weak performances in the mining and manufacturing sectors, too, indicate that the economy contracted.
Weak performances in the mining and manufacturing sectors, too, indicate that the economy contracted.

Contraction in economy looms in the first quarter


By Sunita Menon - May 17th, 09:16

Weak performances in the retail, mining and manufacturing sectors, which bore the brunt of the most severe power cuts the country has experienced yet, indicates that the economy contracted in the first quarter of the year. 

The dismal data comes just a week after the ANC’s victory in last week’s general elections and underlines the scale of the economic challenges faced by President Cyril Ramaphosa, who has vowed to resuscitate the economy.

A weak first quarter will likely cause economists and institutions to revise down growth forecasts, keeping a lid on the economy for another year.

Load-shedding, which returned in November, resulted in a loss of tradable hours for retailers and a halt in production in the mining and manufacturing sectors.

Retail trade sales decreased by 0.7% in the first quarter of the year, data from Statistics SA showed. The retail sector is an important indicator of consumer spending, which drives growth in the economy as it accounts for just more than 60% of GDP.

Consumers also came under pressure in the first quarter with incremental increases in the petrol price and slightly higher inflation in March that eroded real disposable income growth.

This follows weak performances in the mining and manufacturing sectors last week. Mining production fell 3.4% in the first quarter and manufacturing 2.4%.

“This could be the worst performance since the first quarter of 2018,” Capital Economics economist John Ashbourne said.

The economy has not grown by more than 2% annually since 2013 and is struggling to gain momentum despite political changes and Ramaphosa’s efforts to weed out corruption and turn around key state-owned entities.

SA plunged into a recession in the first half of 2018 for the first time since the global financial crisis. The economy contracted 2.2% in the first quarter. In response, Ramaphosa announced an economic stimulus plan with a range of reforms.

Ramaphosa told investors at a Goldman Sachs conference on Wednesday that the government will speed up economic reforms and focus on sector-specific boosts.

“We know the constraints on the economy and we need to speed up on them. Following the technical recession last year, we embarked on an economic stimulus plan and identified a number of reform issues we had to address. That’s already underway,” he said.

“We need to look at every sector where there is weakness and lagged growth and what gives rise to it. What can be egged on to get things to perform better in these sectors?”

Analysts expect the economy to improve in April based on more positive surveys that suggest confidence and activity picked up, along with power-cut reprieves.

Despite an expected rebound, growth will not likely trend sustainably higher, FNB economist Jarred Sullivan said.


Read more about: growth | sales | trade | loadshedding | sa economy | retail

Related News

Checkers brings world-class retail to Constantia with new flagship store
27/11/2019 - 13:01
Checkers has opened the doors to its state-of-the-art 2 330 m² flagship supermarket at the Constantia Emporium as the retailer continues to take innovation to new heights.

Woolworths carves out market share in SA
27/11/2019 - 10:11
In Australia, David Jones's sales declined 2.1%, with the company saying a store refurbishment contributed to the decline.

Push and pull strategies work together to keep consumers coming back for more
26/11/2019 - 10:20
The retail sector is under increasing pressure as consumers have shrinking disposable income in a strained economy. Maintaining share of wallet is critical. Relying solely on a push route to market strategy from manufacturers into retailers is not enough to get consumers buying products. A pull strategy needs to coexist with the push to drive brand consumption. Integrating these strategies requires intelligent and insightful decision-making. This, in turn, requires data generated through smart technology which provides line of sight across the value chain from manufacturer to distribution, retailer to the consumer.

SA expected to sow fewer maize hectares than in previous seasons
26/11/2019 - 10:06
South African farmers are expected to sow 2.8% fewer hectares of the food staple maize next season than forecast in October after the planting season was delayed by rains, a Reuters survey of analysts showed.

Exclusive leases must fall: Commission cracks whip on Shoprite, Pick n pay, Spar, Woolies
26/11/2019 - 09:57
The Competition Commission Inquiry into Grocery Retail, published on Monday, called for an end to the exclusive leases negotiated by national retail chains in all shopping malls across the country in a bid to open up access to markets for smaller players.