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Mark Appleton SA Head of Multi Asset and Strategy

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Positive GDP growth in the second quarter

06 Sep 2017
"...while growth may come in a little higher than the 0.5% we originally anticipated for the year, it is still a very sub-par performance."

The South African economy rebounded in the second quarter of 2017 from two previous quarters of negative growth, with real gross domestic product (GDP) growing by a seasonally adjusted annualised 2.5% quarter-on-quarter. This was slightly better than anticipated. However, it should be noted that underlying economic activity remains weak and while growth may come in a little higher than the 0.5% we originally anticipated for the year, it is still a very sub-par performance. 

Agriculture and mining were strong from relatively low bases but the sustainability of their respective contributions can be questioned. Household spending on food was boosted by declining inflation while spending on apparel was supported by significant discounting. Net exports (trade surplus) was helped by declining import growth. 

What does this mean from an investment perspective?

 

Investment markets are heavily influenced by sustainability, so while this better than anticipated growth number is positive, it is unlikely to materially impact on our valuations.

A lack of confidence is likely to continue to constrain private sector fixed investment growth which is the life blood of an economy and less policy uncertainty will be key to removing this constraint on a sustainable basis.