"Statistics SA announced yesterday that the economy rose by 1,2% in the second quarter of this year after it was decided not to annualize the quarterly growth figures anymore to obtain an annual rate.
However, the figures are still misleading and meaningless because the Gross Domestic Product (GDP) for the second quarter was still compared to the first quarter of this year and not to the same quarter last year,” says Fanie Brink, an independent agricultural economist.
Based on the same figures for this year, the growth rate for the second quarter not only increased by 1,2%, but in fact by 19,3% when compared to the same quarter last year and not to the first quarter of this year.
This large increase in the second quarter reflected the low base effect caused by the very severe downturn in the second quarter last year.
Some economists and most asset managers, as well as the Reserve Bank, have however re-annualized the second quarter's growth figures and expect a growth rate of more than 4% for this year as compared to the previous quarter and adjusted for seasonal fluctuations.
This figure is highly speculative because the third quarter could most likely be much weaker than the same quarter last year due to the damage that the riots have done to the economy.
At the end of this year, the correct growth rate for 2021 will be determined by the nature of the matter by comparing the GDP of the four quarters this year with the GDP of the same four quarters last year in which the comparison of the GDP for this year's quarters with the previous quarters comparison will play absolutely no role whatsoever.
It can by no means be used as an indication of the growth rate that can be expected for this year. The six-monthly growth rate that compared the first two quarters of this year with the same quarter last year and with the impact of the low-base effect of 7,5% is at this stage the best indication of the expected growth rate for this year depending on how the last six months expires.
The quarters in the same year are by no means comparable. If each quarter were to be compared with the same quarter of the previous year, it would in any case be an annual rate that does not have to be annualized or adjusted for seasonal fluctuations because it then also compares the same “seasons” with each other.
Large quarterly seasonal fluctuations occur frequently in the agricultural industry due to the volatility in the climate, but it can also have a major impact on other industries in the economy such as the wholesale and retail industries, as well as the manufacturing and transport industries that need to be pointed out because it also has a major impact on economic growth as well as the consumer prices of food. Mainly because the producer prices of agricultural products are purely based on the demand and supply in the market and not on the total production or manufacturing costs plus a profit margin as determined on the input and output side of the agriculture industry.
The damage caused by the recent riots in July this year on the supply side of the economy is by no means over and along with the rise in unemployment will hurt private consumption spending on the demand side, while the weak business confidence and the continuing electricity shortages mean that economic growth will be significantly delayed for the third.
The release of the Zondo Commission's report on how the ANC government and its cronies have almost finally destroyed the economy and will continue which means that there will be no prospects of any changes or improvements in the economy that can create economic growth.
The fact that economic growth is still being created is purely thanks to entrepreneurs and business executives in the private sector who can, under the appalling conditions created by the government's destructive socialist ideology, still generate profits that are the sole creator of economic growth.
The government will have to accept and realize that the producers, traders, manufacturers, providers of personal services and others on the supply side and the consumers on the demand side of the economy are the most important role players as the creators of economic growth, prosperity and progress.
Fanie Brink - Independent Agricultural Economist
