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Economists expect the economy to avoid a technical recession on improved mining and agriculture data.
Economists expect the economy to avoid a technical recession on improved mining and agriculture data.

Rise in mining outcome may offset recession

ECONOMIC NEWS

By Sunita Menon - May 18th 2017, 11:54

Economists expect the economy to avoid a technical recession on improved mining and agriculture data. 

The economy is likely to have avoided a technical recession because of improved outcomes in mining and agriculture, economists said on Wednesday.

This is despite a lukewarm performance in retail trade sales in March and a disappointing showing in manufacturing.

Retail trade sales, considered the last set of data that will complete the puzzle of how GDP performed in the first quarter of 2017, were released on Wednesday. Retail trade sales rose 0.8% to R61bn year on year in March, according to Statistics SA.

Investec economist Kamilla Kaplan said: "Contractions in the retail trade and manufacturing sectors will have weighed on [first quarter GDP] but the economy is likely to have avoided a technical recession owing to stronger mining sector activity."

BNP Paribas Securities economist Jeffrey Schultz said although the manufacturing and retail trade sectors looked to be the largest drags on GDP growth in the first quarter, "the bounces in [mining and agriculture which are] the primary sectors of the economy should have helped to prop up the overall quarterly GDP growth performance".

Capital Economics economist John Ashbourne said: "Surprisingly, strong retail sales figures support our view that the economy held up better in [the first quarter] than many feared."

"Our GDP tracker suggests the economy stagnated. While this would be a weak result by regional standards, it would be enough to avoid another technical recession," he said.

The 0.8% increase was mainly driven by sales in the food, beverages, and tobacco in specialised stores category. Sales of durable goods such as furniture, appliances, and equipment also rose after declining in nine of the past 10 months, suggesting a slight pick-up in consumer and business confidence.

In the first quarter of 2017, seasonally adjusted retail trade sales dipped 1.1% to R177,8bn.

First National Bank senior economist Jason Muscat said the March figures were not enough to drag the sector into positive territory for the quarter and the retail sector GDP was expected to shave half a percentage point off GDP.

"It’s important to remember the March number won’t reflect the confidence shock we anticipate in the wake of the Cabinet reshuffle and sovereign ratings downgrade and [the second quarter] could remain weak."

© BusinessLIVE MMXVII 

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