South Africa Q1 GDP disappoints, economy heading towards recession in 2016

South Africa's Q1 GDP data disappoints massively. In Q1 2016 real GDP in South Africa fell by 0.3 percent qoq, missing expectations for zero growth. Data for 2015 was also revised and is also illustrating a less favourable picture. Cumulatively, the economic output has already fallen in the past 12 months.

The individual GDP components are also not encouraging. In addition to weaker private consumption (-0.4 percent qoq) it was mainly gross fixed capital formation that collapsed further. They shrank by 1.5 percent qoq having already fallen by 0.7 percent in Q4.

Political turmoil in South Africa is increasingly affecting the economy which is evident in the reduced propensity to invest. Q1 2016 real GDP shrank notably, mainly as a result of weak investments. Unless a rapid solution is found for the political unrest, the South African economy is going to shrink in 2016. The recent slight rise in commodity prices has provided some relief but is unlikely to see a big change.

"We nonetheless now expect the economic output to contract slightly in 2016. We lower our growth forecast for 2016 from 0.9 percent to -0.2 percent. We continue to expect a rise of 1.5 percent for 2017," said Commerzbank in a report.