Fourteen economists polled by Bloomberg put South Africa on track for a 0.1% GDP dip in the second quarter after a 0.5% rise in the first, which would snap the longest streak of quarterly growth in close to 10 years. A minority still see the quarter in the black, just at a slower pace. Unlike Q1, Q2 reflects the full hit from the conflict that started on Feb. 28.
With fighting ongoing all quarter, Brent crude and farm input costs climbed amid curtailed shipping in the Strait of Hormuz. That chokepoint handles about one fifth of global seaborne oil and liquefied natural gas. The squeeze on costs showed up in output: manufacturing fell 1.5% and mining dropped 2.7%, with manufacturing slipping into recession territory.
Manufacturing and mining together make up nearly 20% of South Africa's economy, so their declines mattered. On the consumer side, retail sales in Q2 edged up 0.4%, while wholesale trade fell 4.2%. A 25 basis point interest rate hike in May also began to filter through, softening domestic demand. High frequency readings were weak and sentiment stayed muted, according to Keabetswe Mojapelo of Old Mutual, who said consumer-facing sectors have held up but "it's really touch and go." He added, "We're going to get the true impact of rising inflation and the little tightening we had in monetary policy."
Independent economist John Loos expects the war's drag to become more pronounced in the second half as higher inflation and interest rates temper spending. "The slowdown in real consumer spending from last year will be a key contributing factor," he said. Loos also noted that export-led industries will likely grow more slowly as the conflict weighs on productivity and filters into household incomes. While he sees slower growth, he added, "I don't think a contraction yet, but still positive."
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Bottom line for your wallet: pricier energy and a recent rate hike are feeding into domestic costs and spending power. Keep an eye on inflation, retail trends, and rate moves in the months ahead to gauge how much pressure is building on South African consumers and businesses.
