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South African economy reaps benefit of weak rand
March 6, 2019, 12:04 pm

Final sales grew 10.7 per cent in fourth quarter as net exports add 8.7 percentage points to GDP growth

The South African economy reaped the benefits of a weaker rand as real final sales, which is gross domestic product (GDP) less the change in inventories, grew by 10.7 per cent on a quarter-on-quarter (q/q) seasonally adjusted annualized (saa) basis in the fourth quarter after exports surged by 11.1 per cent on the same basis, while imports plunged by 16.0 per cent.

This meant that net exports added 8.7 percentage points to GDP growth, offsetting the 8.7 percentage points decline caused by a massive draw-down in inventories as domestic producers were unable to meet external demand.

The fourth quarter inventory draw-down was the largest for quarterly data going back to 2010. The previous largest draw-down was in the second quarter 2016 when the constant 2010 rand reduction was R37.4 billion. The inventory draw-downs lead to wild swings in gross domestic expenditure.

In the second quarter 2016 the drop was 4.1 per cent followed by a 5.7 per cent increase the subsequent quarter as inventories are replenished. In the fourth quarter 2018 gross domestic expenditure plummeted by 6.8 per cent, so one should an increase of similar magnitude in the first quarter 2019.

The February manufacturing purchasing managers’ index released on Friday saw the inventory index move above 50 for the strongest increase since March 2017 at 52.8 in February from 46.8 in January and 48.5 in December.

On a year-on-year (y/y) basis GDP growth as measured from the expenditure side eased to a 0.1 per cent contraction in the fourth quarter due to the massive draw-down in inventories from a 0.2 per cent rise in the third quarter, while final sales grew by 1.6 per cent in the fourth quarter after a 0.3 per cent decline in the third quarter.

Household consumption expenditure growth was steady at 1.1 per cent in the fourth and third quarters.

For the full year, GDP growth slowed to 0.7 per cent in 2018 from 1.4 per cent in 2017, while final sales grew by 1.0 per cent in 2018 and 2017. Household consumption expenditure slowed to 1.8 per cent in 2018 from 2.1 per cent in 2017.

Helmo Preuss in Makhanda, South Africa for The BRICS Post

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