Big GDP surprise for South Africa

Year-on-year, growth was at 0.6%, and a 6-month-on-6-month analysis showed 0.7% growth for the comparable periods.

Ahead of the data being published, the rand softened in early trade as markets awaited the numbers. Following the data, the rand strengthened on the better-than-expected outcome.

According to Stats SA, the manufacturing industry increased by 1.8%, contributing 0.2 of a percentage point to GDP growth.

Seven of the ten manufacturing divisions reported positive growth rates. The largest positive contributions were reported for the petroleum, chemical products, rubber and plastic products division and the motor vehicles, parts and accessories and other transport equipment division.

The trade, catering and accommodation industry increased by 1.7%, contributing 0.2 of a percentage point. Increased economic activities were reported for retail trade, motor trade, accommodation and food and beverages.

The mining and quarrying industry increased by 3.7%, contributing 0.2 of a percentage point. The largest positive contributors were platinum group metals (PGMs), gold and chromium ore.

The transport, storage and communication industry decreased by 0.8%, contributing -0,1 of a percentage point. Decreased economic activities were reported for land transport and transport support services.

The construction industry decreased by 0.3%. Decreases were reported for residential buildings and non-residential buildings.

Household final consumption expenditure (HFCE) increased by 0.8%, contributing 0.6 of a percentage point to the total growth. Positive growth rates were reported for durable goods, semi-durable goods and services.

Final consumption expenditure by general government increased by 0,7%, contributing 0,1 of a percentage point to the total growth. This was mainly driven by increases in purchases of goods and services and compensation of employees.

Net exports contributed negatively (-0.3 of a percentage point) to expenditure on GDP.

Exports of goods and services decreased by 3.2%, largely influenced by decreased trade in base metals and articles of base metals; vegetable products; and vehicles and transport equipment excluding large aircraft.

Imports of goods and services decreased by 2.1%, largely influenced by decreased trade in chemical products; machinery and electrical equipment; mineral products; and vegetable products.

Beating expectations

Economists polled by Reuters forecast GDP to inch up to 0.5% qoq from 0.1% qoq in the first quarter.

Nedbank economists estimated growth of 0.6% qoq, saying in a research note that recent data point to a broad-based improvement in economic activity over the quarter.

This proved to be slightly underestimated, with the final numbers even beating estimates that were considered relatively bullish.

Nedbank also predicted that the boost would come from rebounds in mining and manufacturing—which had stunted growth in the previous quarter—which was also an accurate call.

However, while the growth has surprised on the upside, the stagnation of South Africa’s economy cannot be ignored or downplayed.

While positive growth is welcomed, the current levels are not nearly enough to counter population growth and rising unemployment.

South Africa’s Government of National Unity is trying to lift growth through reforms, but longstanding problems like logistics bottlenecks at ports and on the freight rail network continue to hold the economy back.

There are also further troubles on the way.

Notably, the Q2 data reflects economic activity between April and June 2025, and does not account for the 30% tariffs that came into effect on 7 August.

US President Donald Trump finally made good on threats to apply high tariffs on exports to the United States, with South Africa receiving one of the highest rates among trading partners.

The impact on local production and manufacturing, particularly in the auto sector, is already being felt, with economists expecting the full weight of the tariffs to only reflect in 2025 GDP data.

For now, expectations are that there will be a smaller impact on GDP data for Q3 and Q4 2025.

Notably, Nedbank believes the economy will continue to expand in the latter two quarter of the year, despite the tariffs.

The group expects the economy to expand by 0.3% in Q3 and 0.5% in Q4, setting South Africa for total GDP growth of 1% for the year.

Other economists are not as bullish, estimating that the tariffs will knock 0.2 to 0.3 percentage points from 2025’s GDP figures, putting estimated growth at around 0.7%.

Issued on BusinessTech by Staff Writer | https://businesstech.co.za/news/finance/837169/big-gdp-surprise-for-south-africa/