South Africa's economy shows signs of recovery as GDP data approaches

South Africa’s economy looks set for a rebound when second-quarter growth figures were released this week, after scraping by with just 0.1% growth in the first three months of the year.

Old Mutual chief economist Johann Els said, “South Africa’s economy likely rebounded in the second quarter, with gross domestic product (GDP) growth expected at between 0.6% and 0.8% compared with the first quarter.” That translates into “roughly 2.8% annualised, after a weak first quarter”.

Els noted that key sectors pulled the economy out of the doldrums, with quarter-on-quarter gains from mining, manufacturing, and electricity. He added that consumers also “continued to spend more, with robust car and retail sales through the quarter.”

But Els stressed that the recovery does not signal strength. “While that sounds encouraging, make no mistake – it still reflects weak underlying growth. It’s broadly consistent with my full-year growth expectation of around 1.2%.”

Nedbank Group Economics’ Crystal Huntley agreed the second quarter was stronger.

“Our forecast is for the economy to grow by 0.6% in the second quarter. This is up from negligible growth of around 0.1% in the first quarter of 2025.”

Huntley pointed to a “relatively broad-based recovery with most of the momentum coming from rebounds in mining and manufacturing".

The services industry also most likely increased over the quarter, said Huntley.

“What we saw was retail, motor trade sales and real income from accommodation and food services accelerating, while on the downside, wholesale sales contracted, which dampened the contribution from domestic trade to overall GDP,” said Huntley.

Agriculture, she said, held up despite challenges. “Favourable weather conditions kept crops and horticulture positive, while struggles with animal diseases remained a drag on livestock,” Huntley added.

Looking further ahead, Huntley said domestic demand would be crucial.

“Domestic demand will be supported by firmer consumer confidence, sustained by a recovery in real household incomes, driven by lower inflation and debt service costs due to the reduced interest rates.”

Investec economist Lara Hodes expects growth to be more modest but still improved.

The bank expects second quarter GDP to have lifted to 0.4% year-on-year, “with incoming data readings for the quarter to date modestly up overall.”

However, Hodes warned that the economy remains constrained.

“The outlook is reflective of an economy, which continues to face a number of challenges, notably on the logistics front. Moreover, business confidence remains in contractionary territory, weighing on investment and accordingly growth and job creation.”

IOL