Five reasons Cyril Ramaphosa needs to panic about the economy right now
Shock GDP number adds to the country's economic woes as Ramaphosa faces bleak summer of discontent
1. The country is now officially in recession
SA has plunged into a recession with a surprise 0.7% contraction in the second quarter of 2018.
“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.
2. The rand is at its weakest since 2016 under Zuma
As news of the recession broke, the currency dropped dramatically to levels it last saw in June 2016.
It broke through the R15 to the dollar level shortly before the GDP figures were released and then declined very quickly when the number became official.
3. The oil price is on the march
The price of Brent crude oil is marching steadily upwards. It has risen from about $72 a barrel in mid-August to $79 a barrel on September 4. This is despite an announcement by Opec that it will increase production, suggesting that there is a genuine shortage pushing the price higher.
4. Bad signs for the future of manufacturing
A grim outlook for the manufacturing sector has dented hopes that SA’s economy will rebound in the second half of 2018.
Activity in the sector, which accounts for about 13% of GDP, dipped to the lowest level in 13 months, the Absa purchasing managers index (PMI) showed on Monday.
The PMI declined from 51.5 points in July to 43.4 in August.
The index gauges activity in the manufacturing sector and is usually a good indicator of where the production numbers will head in two months’ time. A figure below 50 indicates contraction in the sector.
5. Unemployment is on the rise
The country's unemployment rate increased 0.5% in the second quarter to reach a near 15-year high of 27.2%. Youth unemployment, accounting for those between the ages of 15 years and 34 years, sits at 38.8%, while the young graduate unemployment rate sits at 11.9%.