In today's blog we take a look at the latest economic growth figures (GDP) for South Africa, for quarter 2, 2017. We take a look at GDP growth rates as recorded by both the production and expenditure methods.
SA's economic growth rate for Q2:2017
Production Method (The official method used in South Africa)
Below we take a look at the summary of South Africa's 2nd quarter 2017 economic growth rates, based on two official methods of calculating GDP. The first method (and the method used as the official GDP figure), is the production method. This method measures the value of all goods and services produced within the borders of the country within a specified period (a quarter). The value all all goods and services produced during the current quarter is then measured against that of the previous quarter. And the growth rate is then "annualised" to get an estimated growth figure for a year instead of just having the growth over a quarter. The graphic below shows the GDP quarter on quarter annualised for the production method (the official method used for calculating South Africa's GDP).
As can be seen from the graphic above Agriculture, forestry and fishing showed significant growth over the quarter (largely due to base effect). I.e the previous quarter's agricultural levels (quarter 1, 2017) were exceptionally low. Thus any growth recorded in the sector in quarter 2, 2017) leads to strong growth quarter over quarter. Other than agriculture, the growth in the rest of the industries were pretty subdued.
As opposed to the production method that looks at the total value of goods and services produced within the borders of the country during a period of time, the expenditure method looks at the total value of expenditure within the borders of the country during a specified time period. While the growth rates in production and expenditure will hardly ever be the same over the same quarter, over time the growth rates recorded by production and expenditure should be very similar.
As can be seen from the graphic above household expenditure that has been annualised showed pretty strong growth. Exports also showed strong growth, but exports impact was offset by equally strong growth in imports. Leaving only marginal gains for net exports (exports-imports). While the growth rates from both production and expenditure side shows that South Africa is officially out of a recession one data point does not confirm the reversal of a trend, and when looking at SA's annual economic growth rates over time, SA's economy is far from healthy or in a position to create jobs and address unemployment meaningfully.
GDP production vs GDP expenditure
The graphic below shows the quarter on quarter annualised growth rates for the GDP production and GDP expenditure approaches for South Africa over time.
As the graphic shows the growth rates as calculated by GDP production and expenditure is very similar over time. Sadly SA's growth rate is oscillating around the zero mark, instead of heading and staying in a positive direction over time. And therein lies SA's economic growth rate problem. There is not sufficient sustainable growth over time in SA, that can assist in increasing employment in SA which in turn will increasing tax revenue numbers for the state via greater VAT being collected due to more people being employed and spending money, more taxes collected as more employed people will mean more people needs to pay tax and all this helping to improve the overall well being of the citizens of South Africa as more revenue for the state means more money can be allocated by government to not only assist the poor but to implement plans and policies that will assist in alleviating the poor, while continue to provide more and better services to all citizens in South Africa.