The South African economy expanded in Q2, as GDP growth rose to 0.4% q/q from 0.0% q/q in Q1. On a year-on-year basis, GDP growth came in at 0.3% in Q2, lower than the disappointing start to the year of 0.5% y/y in Q1. SA households and businesses continued to take strain in difficult economic conditions despite an end to load-shedding. While the GDP numbers were weak, this was expected amid elevated interest rates. Looking ahead, the Q3 GDP print is expected to show some improvement as a more meaningful shift among business and consumer confidence has taken place due to the formation of the more centrist GNU. That said, it will take time for pragmatic policymaking to create more supportive economic conditions.
For a less outdated update on the state of the South African economy, investors will have the August edition of the S&P Global SA PMI to digest today, alongside the BER business confidence index for Q3. The latter will be particularly interesting given that improved confidence has been observed in the South African economy after the formation of the GNU. Additionally, the absence of load-shedding through Q3 likely added to an improved economic outlook. The Q3 business confidence print should therefore show an improved reading. However, in order to sustain the improvement in business confidence, the GNU has to follow through with improved, more pragmatic policymaking.