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Yesterday, Stats SA released the GDP stats for the third quarter, from July through to the end of September.

The headline number touted was the 66,1% growth, calculated on a seasonally adjusted and annualised basis.

Sounds like a pretty decent fightback, right?

Well, yes and no.

First of all, here are some graphics Stats SA rolled out on Twitter:

A massive green spike is clearly not a bad thing, but context is required.

For a start, that 66,1% quarter-on-quarter, seasonally adjusted, annualised figure is actually far better than optimistic industry expectation, and the markets reacted well to the news, with the rand strengthening.

However, as Moneyweb points out, “this number is the result of a very specific cocktail”:

The first ingredient is obviously the fact that we are measuring the growth off a very, very low base because GDP more than halved in the previous quarter (quarter-on-quarter, seasonally adjusted, annualised)…

Going from being closed and at rock-bottom to suddenly reopening for business has resulted in a massive base effect, which is visible in these numbers.

The second ingredient in the cocktail lies in the fact that not only has South Africa opened up but our trading partners and the rest of the world have too – a welcome tailwind for the SA economy to be sure.

We can then drop into the cocktail the fact that we have been blessed with fewer load shedding days, which means no further hampering of the economy.

Please, let’s not mention that phrase.

We know it’s going to return at some stage, and we’ll all be checking EskomSePush to see when the lights go out, but I’m willing to bury my head in the sand until such a time.

From that first Stats SA image, you can see that the real year-on-year growth number is -6%, which is a massive contraction that shows the impact of COVID-19 and the lockdown.

It appears likely that Q4, running from October through to the end of December, will see more positive growth, but we’re likely to end the year somewhere around -7,5% when factoring in the first two quarters.

Let’s pluck out a few positives, though:

It was encouraging to see household expenditure up almost 70%. Given the many job losses that the economy has suffered, it is comforting to see that consumers are also rebounding. Restaurants and hotels have performed particularly well as the economy has opened up.

Alcohol and tobacco have also done extremely well as the ban on those products has been lifted. Most other consumer goods have generated solid numbers.

Booze and ciggies roaring back – can’t say that will surprise anybody.

Moneyweb wraps up its excellent analysis as follows:

In summary, the print is positive and might help to generate a better growth rate for the whole year but, at -7.5%, we are still expecting a relatively high negative number for 2020 overall…

From the fiscal cliff that we are facing to the government wage negotiations, things continue to look bleak and policy reform remains as urgent as ever.

If we can address the structural issues, turn Eskom around and continue along this path, then 2021 can be a year when we produce at closer to potential capacity…The good news is that the economy is doing better than we had hoped for. The bad news is that we still have an enormous way to go and a massive amount of work to do to get there.

The number one priority, as it always seems to be, is rooting out corruption.

Tick that box, along with some structural and policy reform, and progress is being made.

You can see the full Stats SA report here.

[sources:moneyweb&statssa]