WATCH | Cyril Ramaphosa has a recession on his hands

SA has plunged into a recession with a surprise 0.7% contraction in the second quarter of the year.

“We are in recession. We reported a contraction in the first quarter even with revisions and now in the second quarter with a fall of 0.7%‚ we are in recession‚” statistician-general Risenga Maluleke said in Pretoria on Tuesday.

This is despite expectations from many economists that SA would narrowly miss a recession. The Bloomberg consensus was 0.6% growth.

A recession is defined as two consecutive quarters of declining gross domestic product (GDP) and points to a prolonged slowdown in economic activity‚ which stunts job creation and damps investment.

Following the revisions to growth figures for 2017‚ this makes it the first recession since the global financial crisis.

This follows a dismal performance in the first quarter‚ when GDP shrank by a revised 2.6%. It was originally put at a 2.2% contraction.

The contraction was driven largely by the primary sector‚ with agriculture offsetting the positive growth in the mining sector.

While the secondary sector‚ which is made up of manufacturing‚ electricity and construction saw some growth‚ this was dampened by a 0.3% contraction in the manufacturing sector.

The biggest drags on economic growth were agriculture‚ forestry and fisheries‚ which decreased by 29.2% and detracted 0.8 percentage points from growth; and the transport‚ storage and communications industry‚ which decreased by 4.9% and accounted for 0.4 percentage points of the contraction.

The decline in agriculture was driven by a drop in the production of field crops and horticultural products.

In contrast‚ mining increased by 4.9% and contributed 0.4 percentage points of growth; while finance‚ real estate and business services increased by 1.9% and also contributed 0.4 percentage points.