Guys, things aren’t looking great for the South African economy.

It contracted 3,2% in the first quarter of 2019. That’s the worst drop since the same period in 2009, when the economy contracted 6,1% in the wake of the global financial crisis.

Load shedding, higher income taxes, and sluggish wage growth have all been cited by economists as reasons for the sudden drop.

The manufacturing sector made the highest contribution to the quarterly contraction, falling 8,8% reports BusinessLIVE.

That said, activity fell in almost every sector of the economy.

The rand, which was at R14.46/$ immediately before the announcement, fell to R14.61 within minutes, a plunge of more than 1% on the day. On the JSE, banks fell sharply. Standard Bank was 3.9% down, Rand Merchant Investment Holdings and Absa fell 3.4%, and FirstRand 3.2%.

South Africa’s GDP growth in the first quarter came to 0% year on year – also bleaker than expected.

The consensus according to macroeconomics website Trading Economics was for SA’s GDP to contract 1.7% quarter on quarter, but grow 0.7% year on year.

The plunge wiped R56bn off SA’s nominal GDP, putting it at R1.2-trillion at the end of March. That is the equivalent of a company the size of MultiChoice Group, the pan-African pay-TV operator with a market capitalisation of R54.2bn on Tuesday.

Household consumption fell 0,8% while the mining industry contracted 10,8%.

The dismal GDP print underscores fears that a slowing global economy and lack of domestic business confidence has undercut SA’s expected economic recovery in 2019. The numbers are likely to reinforce expectations that the Reserve Bank will move to cut interest rates, possibly at its next meeting in July.

So yeah…not the best news on a Tuesday.

Chin up – we’ve made it through before, and we’ll (probably?) make it through again.

[source:businesslive]