SA GDP commentary June 2024

Little to no growth as expected...

On Tuesday 4 June, Statistics South Africa released the first quarter’s GDP data for the South African economy. Expectations were justifiably low, and GDP growth for the quarter came in at -0.1%, testament to the moribund state of the local economy.

Last year the economy grew 0.6%, with the South African Reserve Bank (SARB) estimating that loadshedding shaved 1.5% off GDP growth. This year the SARB believes we will grow 1.2%, which is slightly more optimistic than the IMF’s 0.9%, with cost of loadshedding falling to 0.5%.

Prospects for a more meaningful rebound will be tempered by the lukewarm economic data releases seen in 2024. Retail sales, manufacturing, and mining production data have all been decidedly downbeat thus far. On the positive side, loadshedding seems to have eased significantly. The latest Absa PMI release is also tentatively positive, having breached the key 50-level, signalling the possibility of some economic expansion down the road.

Going forward, consumers are likely to remain under pressure, with interest rates expected to remain elevated for the remainder of the year. Any boost to the local economy will need to come from abroad, where global economic growth has remained resilient, driven by the US economy. At the same time, any softness in global growth, may put a dampener on SA’s already weak prospects.

Portfolio positioning across the PPS range of funds currently reflects the risks to the South African economic outlook by being conservatively positioned in growth assets. Valuations are attractive on some metrics, however on a relative basis, given where interest rates are, the opportunity cost of being defensively positioned remains low.