After a 0.5% first-quarter rise, economists see South Africa's economy slipping 0.1% in Q2, which would break the longest stretch of quarter-on-quarter growth since almost a decade ago. The softness shows up in industry too: manufacturing output contracted 1.5% and mining dropped 2.7% in the quarter, with manufacturing described as having slipped into recession territory. Consumer-facing activity looks mixed, with retail sales up 0.4% and wholesale trade down 4.2%. Key sectors that make up almost a fifth of GDP also contracted.
Q1 only caught the opening shock of the war in Iran, but Q2 captured a full quarter of disruption. Hostilities ran throughout the quarter, pushing up Brent crude and farm-input bills and clogging the Strait of Hormuz - a passageway that carries about a fifth of global seaborne oil and liquefied natural gas. A 25 basis point interest-rate hike in May also started to feed through, weighing on local demand. Those higher input costs tied to the conflict were among the factors behind the pullback in manufacturing and mining.
"For the most part, we've had very weak high-frequency data throughout the quarter, sentiment has been quite subdued," said Keabetswe Mojapelo, who leads economic research at Old Mutual Ltd. He noted that consumer-facing sectors have been resilient, but "it's really touch and go," he said. "We're going to get the true impact of rising inflation and the little tightening we had in monetary policy." He added that war-related uncertainty is likely to keep investment muted: "Sentiment indicators have not been on an upbeat trajectory, a lot of the sentiment surveys all point to uncertainty with the war," he said. "It might be investment is still sluggish, but not structural per se, but because of the uncertainty that we have, and also the interest rate trajectory as well from a funding perspective; that is likely to persist."
A smaller group of economists in the Bloomberg survey still expect growth in Q2, but slower than Q1. Independent economist John Loos sees the squeeze intensifying in the second half as higher inflation and interest rates curb spending. "The slowdown in real consumer spending from last year will be a key contributing factor," he said.
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"I don't think a contraction yet, but still positive," Loos said. "This year, you've got higher inflation, and it looks like we're going to have higher inflation for the year as a whole. We've got interest rates rising slightly again." He also expects export-focused industries to lose steam as the war weighs on productivity and filters through to household incomes.
If Q2 does land negative, it is the kind of environment where pricier energy and slightly tighter credit make households more cautious and businesses slower to invest. That often shows up as softer retail and wholesale activity, plus choppier output in heavy industry. Keep an eye on inflation, interest rate moves into year-end, and any change in shipping snarls through the Strait of Hormuz. Those will shape whether everyday costs ease up or keep nibbling at your budget.
