GDP comment: Resilience through the second wave

As was also the case in the second half of 2020, Stats SA reported that real GDP performed better than expected in the first quarter of 2021. Although the GDP recovery continues to beat expectations, the level of real GDP remains below where it was pre-pandemic (2019Q4). In fact, because the economy hardly grew in 2019, the 2021Q1 GDP level was still 2.9% below where it was as far back as in 2019Q1. This is important to keep in mind. Whereas the economy is in a cyclical growth recovery, the underlying level of activity remains depressed. Therefore, the GDP recovery is still incomplete.

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After rising to 16 in 2021Q1, the FNB/BER Civil Confidence Index gained a further five points to register a level of 21 in 2021Q1. Higher activity this quarter boosted sentiment.

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose to a solid 57.8 points in May 2021 from 56.2 the month before. Four of the five subcomponents remained well above the neutral 50-point mark with only the employment index dipping back into negative terrain. In all, the average level of the PMI recorded in the first two months of the second quarter of 2021 (57 points) is well above the first quarter’s average (53.8), which suggests that the sector is on track to record another quarterly expansion. A significant annual expansion is effectively guaranteed given the extremely low base set in the second quarter of 2020.

After declining by five points in the first quarter, the RMB/BER BCI jumped by 15 to 50 in the second quarter. Confidence rebounded especially sharply in the manufacturing, retail trade and motor trade sectors. By contrast, sentiment among building contractors and the wholesale trade sector improved only marginally. While the improvement in sentiment is no doubt encouraging, uncertainties remain.

The FNB/BER Consumer Confidence Index (CCI) increased by another 3 index points to a level of -9 in the first quarter of 2021. The recovery to -9 index points brings the CCI back in line with the reading recorded in March 2020, just before South Africa entered its first strict nationwide lockdown. Although it is heartening that the CCI has now recovered most of its COVID-19-induced losses, consumer confidence in general remains depressed - the latest reading of -9 is still well below the average CCI reading of +2 since 1994.