Picture: ISTOCK
Picture: ISTOCK

As expected, the SA economy crawled out of recession in the second quarter, with growth of 2.5% q/q thanks to base effects. More importantly, it posted stronger year-on-year growth — something that can’t be explained away by mere technical factors.

But it would be overstating things to say the economy is going to surprise us this year. Confidence, investment and overall economic activity remain weak.

Most worrying is that annual growth in fixed investment has fallen for the seventh quarter, reflecting deeply depressed business confidence. This was expected, given that the confidence-sapping effects of President Jacob Zuma’s cabinet reshuffle, which caused SA’s downgrade to junk, were felt from April onwards. The potential for more politically induced setbacks remains large as the ANC leadership battle descends into the gutter.

Yet there are a few bright spots in the GDP data: better global conditions are boosting SA exports and the recovery in agriculture is undeniably robust.

Also positive is that falling inflation lifted household consumption expenditure to its best quarterly growth point in five years, and that further interest-rate cuts remain on the cards.

But the bottom line is that there is nothing to suggest a sustainable revival in economic activity is under way. Only a return of confidence can achieve that.

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