Macro Pulse Episode 6

And the key factor in driving this disappointment was the agricultural sector. The agricultural sector detracted point 7% to GDP. And for the sector alone, the growth impact on q three was negative 29%. The key contributor to this detraction was the agricultural sector, which detracted 29% over the quarter and contributed negative point 7% to GDP. So if you exclude the agricultural sector, GDP would have been roughly in line with the consensus.

The reason for this contraction was because of poor production due to the drought conditions that we had mid summer. So wheat, maize, and soybeans production all detracted quite significantly. Agriculture is very volatile. It’s also a small sector, only 3% of GDP. So we do expect potentially sharp revisions or a sharp recovery in the next quarter or two.

To be fair, it’s not just agriculture disappointed. Trade and transport also disappointed the downside and also contracted. On the positive side, if you look at the expenditure side of the GDP print, household consumption was fairly robust. We also saw that fixed capital formation grew slightly. And we’ve had a sharp rundown in inventory, which is typically an indicator that we may get, a bit of recovery in that in the coming quarter.

So from a growth perspective, we continue to see 2025 growth will remain between 2% and 3%. However, for this year, growth will struggle to get to the 1% that the market was expecting, maybe closer to, you know, point 5%. How will monetary policy react to this data print? Well, the SARP’s next meeting is only at the end January. And so there will be a few data prints that comes out before that that may still impact the SARP’s decision.

We believe that the SARP will continue to cut interest rates. If anything, the GDP print may show that it will take longer for the SARP to close this output gap than they have anticipated. And therefore, they may have to continue to cut interest rates to shore up the economy and support the economy. On the other hand, we still have a small risk that food inflation may start to emerge. Just as agriculture disappointed to the downside because of production, it means that maize production in the country has dropped quite significantly.

So we saw a 23% drop in production and other Southern African countries have experienced something similar where they saw production drop by 50%. This means This means that there is a shortage of maize in the region as a whole. Not in South Africa. South Africa’s use is about 12,000,000 tons a year, and we’ve produced around 30,000,000 tons thus far. And there’s about 2,000,000 tons in stock. So South Africa does not face a deficit in maize.

However, the region is facing a deficit in maize, and that has driven up maize prices. And that could potentially still have an impact on inflation sometimes next year. Despite that, we still continue to see inflation as being low and remain below the four and a half percent over the coming quarters, which will allow the SARP to cut rates. That’s all for today. Hope you rest well.

See you next year.