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Data just released by Stats SA shows that South Africa’s real GDP grew by 2.7% q/q annualised in the first quarter of 2012. This is down from 3.2% in Q4. Consensus economists polled by Bloomberg expected an increase of 2.3%.
Large macro aggregated data like GDP isn’t very useful to understanding developments in the economy. I don’t bother making forecasts of aggregated economic figures like this. I explained this in a note I put out to clients this morning:
Of course, the GDP figure tells us very little about the dynamics of the business cycle upswing currently materialising, and a slowdown of real GDP growth at this stage of the cycle means very little for interest rates going forward…
Our view still remains that following the surge of credit and money growth in h2 2011, the new money in the economy will make its way to the consumer level and result in a decline of demand to hold cash balances, and boost consumer spending and hence also consumer price inflation in the second half of the year…
GDP – as a large macro aggregated number – is much less reliable than the hard data coming out of company results, equity prices, credit and money data, and other targeted data compiled by private and public data providers. As a result, while we note the risk a weak GDP number may have to interest rate markets, a fundamental outlook for the economy won’t be determined by today’s number.
Here’s what you need to know about the SA economy: Like I have maintained since September 2011, SA is still in a cyclical upswing phase. GDP figures are a history lesson of what’s already happened in the economy. And a bad history lesson too. It gives you little to no indication of what lies ahead for the economy.
Making economic predictions based on GDP is like steering your car based on what’s happening in the rear view mirror.
Note that the relative strength of SA GDP growth is in direct contrast with the down-phase of the business cycle materialising in China, Europe and the UK. SA growth has picked up, despite the growth slowdowns materialising in these major economies.