South Africa's economy shrunk in second quarter as mining and manufacturing stumbled

South Africa's economy contracted by 0.2% in the second quarter, marking a reversal from the 0.4% growth experienced in the first quarter, according to data released by Stats SA. This contraction marked the first decline since the third quarter of 2024, when the GDP fell by 0.3%. Three sectors, including mining, manufacturing, and trade, were responsible for the contraction.

Mining shrank by 3%, manufacturing declined by 1.8%, and trade, catering, and accommodation fell by 1.9%. These sectors collectively shaved 0.2 percentage points off the overall GDP growth, while mining subtracted an additional 0.1 percentage point. Agriculture, electricity, gas, and water, and transport sectors grew by 0.3%, 1%, and 0.9%, respectively.

The expenditure side saw household spending increase by 0.4%, but net exports pulled 1.1 percentage points down due to imports rising faster than exports. The second quarter was the first full quarter affected by the oil shock and higher petrol prices, as well as the May interest rate hike. Economists had anticipated the economy to remain flat or contract by up to 0.2% quarter-on-quarter, with concerns that the high-frequency data so far indicated a "mixed bag."

Mining and manufacturing were particularly weak, but consumer spending held up reasonably well. The second quarter was also the first to fully reflect the oil shock and higher petrol prices. The May interest rate hike added further pressure. Despite the expectations of little or no growth during the quarter, economists believed the outcome would not derail the expected full-year growth of 1.4 to 1.6%.