File photo: Elmond Jiyane File photo: Elmond Jiyane
Johannesburg - The latest Standard Bank Purchasing Managers’ Index (PMI) on Friday signals the country's ongoing improvement in private sector operating conditions, while on an annual basis, the economy is forecast to have grown by 0.5 percent in 2016.
Investec said growth was expected to improve somewhat, to a still weak recovery of 1.1 percent in 2017, and only reach 2 percent by 2020.
Contributing to this lift in growth is the expected increase in exports in tandem with the forecast improvement in global growth and global trade momentum.
Kamilla Kaplan, an economist at Investec, said on Friday that the fourth quarter gross domestic (GDP) growth of 2016 signalled a contraction of 0.3 percent compared with growth of 0.2 percent in the third quarter.
She said in the fourth quarter real value added in mining and manufacturing sectors likely contracted, based on the guidance provided by the actual monthly production updates.
GDP growth data is expected on Tuesday.
“Lingering drought effects are expected to have a continued suppressing effect on the performance of the agriculture sector.
Partially countering the extent of decline in GDP in the fourth quarter is likely to be a positive contribution from the retail, wholesale and motor trade sales sector.”
Kaplan said the financial sector, which comprises more than 20 percent of GDP, was likely to have made "a positive contribution to GDP, with the banking sector continuing to perform relatively well.”
She said on a year-on-year basis, GDP growth was forecast to have shrunk to 0.6 percent in the fourth quarter, compared with 0.7percent in the third quarter.
Kaplan said over the last few years the economic performance had been impacted by a weak global economy, with the growth rate reaching post crisis lows in 2016.
The effect on South Africa has been exacerbated by domestic challenges.
“These include structural constraints and policy uncertainty that is perceived to have dampened business confidence and ultimately fixed investment rates,” she said.
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The Standard Bank South Africa PMI remained above 50 points for the sixth month running in February, the longest sequence of positive readings in nearly three years and signalling an ongoing improvement in the private sector operating conditions.
Standard Bank said: “That said, the PMI fell further from December’s 21 month high of 51.6 points to 50.5 points, indicative of only a slight improvement.
The latest figure was below the long-run survey average of 50.8 points.”
The PMI found the South African private sector output increased for the sixth successive month in February, the longest sequence of growth in nearly five years.
Standard Bank said the volume of new business increased for the fourth month running in February.
Standard Bank also said that private sector employment has risen for the eight month running in February, the longest period of job creation in nearly four years.