The real output of the primary sector reverted from a revised expansion of 3.4% in the fourth quarter of 2021 to a contraction of 0.4% in the first quarter of 2022. Growth in the real GVA by the agricultural sector moderated sharply in the first quarter of 2022 as the production of field crops and animal products decreased, with the former negatively impacted by excessive rainfall at the start of the 2021/22 production season. Mining output contracted for a third successive quarter in the first quarter of 2022 as production volumes declined across a wide range of subsectors.

The real GVA by the secondary sector increased further by 3.7% in the first quarter of 2022. Growth in real manufacturing output accelerated to a robust 4.9% in the first quarter of 2022 as production volumes increased in 7 of the 10 manufacturing subsectors. Real economic activity in the sector supplying electricity, gas and water switched from a contraction in the fourth quarter of 2021 to an expansion in the first quarter of 2022, reflecting a notable turnaround in both electricity production and consumption. The real GVA by the construction sector declined for a fourth successive quarter in the first quarter of 2022 due to lower civil construction and residential building activity.

Growth in the real output of the tertiary sector accelerated to 1.8% in the first quarter of 2022 as the real GVA by the finance, insurance, real estate and business services sector and by the general government services sector rebounded. Real output increased in the insurance, real estate and business services subsectors in the first quarter of 2022 alongside a recovery in the financial markets, as share and bond trading increased. Real economic activity in this sector has remained relatively resilient during the COVID-19 pandemic, staying above the average 2019 level, except in the second quarter of 2020. Real output growth in the commerce sector moderated slightly to a still brisk 3.1% in the first quarter of 2022 as real economic activity increased in the wholesale, retail and motor trade subsectors, benefitting from the further easing of lockdown restrictions. Growth in the real output of the transport, storage and communication sector also moderated somewhat in the first quarter of 2022, reflecting reduced activity in rail freight transportation as well as fewer passenger journeys undertaken.

Similar to real GDP, real gross domestic expenditure (GDE) accelerated to 2.2% in the first quarter of 2022 from 1.4% in the fourth quarter of 2021, but remained below the average 2019 pre-pandemic level. The acceleration reflected faster growth in both real gross fixed capital formation and final consumption expenditure by general government, while real final consumption expenditure by households increased at a slower pace alongside a much slower de-accumulation of real inventory holdings.

Growth in real final consumption expenditure by households more than halved to 1.4% in the first quarter of 2022, consistent with slower growth in the real disposable income of households. Real outlays on semi-durable and non-durable goods as well as on services increased at a slower pace, while expenditure on durable goods rose at a faster pace. Real spending on personal transport equipment increased strongly in the first quarter of 2022, reflecting the improved stock availability of new motor vehicles. The slower growth in household expenditure reflected, among other things, the surge in fuel prices which increased households’ cost of living. Nevertheless, real household consumption expenditure finally surpassed the average 2019 pre-pandemic level in the first quarter of 2022.

Growth in household debt accelerated in the first quarter of 2022 as most categories of credit extended to households increased. However, household debt as a percentage of nominal disposable income decreased to 64.5% in the first quarter of 2022 from 65.1% in the fourth quarter of 2021, as the increase in nominal disposable income exceeded that in household debt. Households’ cost of servicing debt as a percentage of nominal disposable income edged higher to 7.3% in the first quarter of 2022 from 7.2% in the previous quarter, reflecting the combination of the higher debt and the cumulative 50 basis point increase in the prime lending rate in the first quarter of 2022.

Households’ net wealth increased further in the first quarter of 2022 as the increase in the market value of assets outpaced that in liabilities. The higher market value of assets reflected capital gains on equity portfolios and, to a lesser extent, an increase in house prices. Equity holdings were boosted by a further increase of 2.4% in the FTSE/JSE All-Share Index (Alsi) in the first quarter of 2022. Despite the further increase in nominal residential property prices in the first quarter of 2022, year-on-year growth has slowed gradually since the second quarter of 2021.

Growth in real gross fixed capital formation accelerated to 3.6% in the first quarter of 2022 as private business enterprises and general government increased capital outlays, while public corporations reduced capital spending. The significant increase in capital outlays by private business enterprises reflected increased investment in construction work as well as machinery and other equipment, lifting the private sector’s share of total nominal gross fixed capital formation further to 72.3% in the first quarter of 2022. Despite the further increase, the level of total real fixed capital investment in the first quarter of 2022 was still 10.9% lower than the average in 2019, before the COVID-19 lockdown restrictions were imposed.

Total household-surveyed employment increased by a further 370 000 jobs in the first quarter of 2022, along with an improvement in the response rate of Statistics South Africa’s Quarterly Labour Force Survey. The increase in employment was broad-based across the different sectors, with both formal and informal employment increasing notably. This, together with a decrease in the number of unemployed persons, resulted in a decline in South Africa’s official unemployment rate to 34.5% in the first quarter of 2022 from 35.3% in the fourth quarter of 2021 — its first decrease after 11 consecutive quarters of increase, except for the second quarter of 2020.

Enterprise-surveyed formal non-agricultural employment increased marginally in the fourth quarter of 2021, mostly due to additional temporary employment gains in the public sector which more than offset job losses in the private sector. Most of the private sector job losses occurred in the finance, insurance, real estate and business services sector, followed by the construction sector. The trade, catering and accommodation services sector, which bore the brunt of the July 2021 civil unrest, and the non-gold mining sector were the only private subsectors that recorded employment gains in the fourth quarter of 2021.

Year-on-year growth in nominal remuneration per worker in the formal non-agricultural sector moderated from 9.2% in the third quarter of 2021 to 5.8% in the fourth quarter, as both private and public sector remuneration growth per worker slowed, largely reflecting the dissipation of base effects. Annual average growth in nominal remuneration per worker accelerated substantially from a record-low of 0.8% in 2020 to 7.4% in 2021, as both private and public sector remuneration growth quickened from the COVID-19-induced lows in 2020.

Labour productivity growth in the formal non-agricultural sector of the economy moderated further from 2.3% in the third quarter of 2021 to 1.1% in the fourth quarter, as year-on-year output growth slowed at a faster pace than that in employment. The annual average change in labour productivity reverted from a decrease of 1.7% in 2020 to an increase of 6.0% in 2021, impacted by the low base created by the COVID-19-induced contraction in output in 2020. Likewise, growth in nominal unit labour cost in the formal non-agricultural sector slowed from 6.8% in the third quarter of 2021 to 4.6% in the fourth quarter, as the moderation in total remuneration growth outweighed that in output growth. Annual average growth in nominal unit labour cost slowed further to 1.7% in 2021.

The acceleration in both headline consumer and producer price inflation thus far in 2022 has reflected the sustained surge in domestic and global inflationary pressures.  Producer price inflation for final manufactured goods accelerated to a 14-year high of 13.1% in April 2022, reflecting sharply higher input costs, most notably those of fuel, coal, electricity, metals, fertiliser and freight transportation. The war between Russia and Ukraine has aggravated global supply chain disruptions and added to the shortage of critical commodities, such as wheat and crude oil. Headline consumer price inflation accelerated to 6.5% in May 2022, largely due to record-high fuel prices and, to a lesser extent, higher food prices. Consumer services price inflation was much lower but has nevertheless accelerated gradually since early 2021.

South Africa’s trade surplus with the rest of the world increased in the first quarter of 2022 as the value of net gold and merchandise exports increased more than that of merchandise imports. The increase in both export and import values reflected higher prices, in particular for international commodity prices, and higher volumes. Following two consecutive quarterly declines, South Africa’s terms of trade improved marginally in the first quarter of 2022.

The value of merchandise exports increased further in the first quarter of 2022 as mining, manufacturing and agricultural exports increased. Higher mining exports reflected increases in mineral products, mostly due to further price increases and, to a lesser extent, higher volumes. The United States (US) dollar price of a basket of domestically produced non-gold export commodities increased by 20.3% in the first quarter of 2022 following heightened supply concerns after Russia’s invasion of Ukraine. The higher value of manufacturing exports in the first quarter of 2022 largely reflected the increased exports of vehicles and transport equipment as well as machinery and electrical equipment.

The higher value of merchandise imports in the first quarter of 2022 reflected increases in mining, manufacturing and agricultural imports. Manufacturing imports were boosted by significant increases in the importation of vehicles and transport equipment as well as machinery and electrical equipment. The higher value of mining imports continued to reflect the marked increase in the prices of minerals, particularly of crude oil and refined petroleum products, with especially diesel imports increasing notably.

The shortfall on the services, income and current transfer account widened in the first quarter of 2022 as larger deficits on the services and current transfer accounts outweighed a smaller deficit on the income account. This, combined with the larger trade surplus, resulted in a slight increase in the surplus on the current account of South Africa’s balance of payments to 2.2% of GDP in the first quarter of 2022 from 2.1% in the previous quarter.

South Africa recorded a net inflow of capital on the financial account of the balance of payments of R23.4 billion in the first quarter of 2022 following a revised outflow of R55.2 billion in the fourth quarter of 2021. On a net basis, all financial account functional categories recorded inflows, except for reserve assets. Portfolio investment inflows reflected net purchases of domestic equity and debt securities by non-residents following net sales in the previous quarter.

South Africa’s total external debt decreased from US$165.0 billion at the end of September 2021 to US$160.5 billion at the end of December as rand-denominated external debt decreased. Foreign currency-denominated external debt increased slightly over the same period.

South Africa’s positive net international investment position (IIP) increased from the end of September 2021 to the end of December, following five successive quarterly declines. The value of foreign assets increased more than that of foreign liabilities over this period. The net IIP was influenced by valuation effects due to the notable increase in domestic and global share prices as well as the depreciation in the exchange value of the rand in the fourth quarter of 2021.

The nominal effective exchange rate (NEER) of the rand increased by 10.8% in the first quarter of 2022 following a decrease of 8.5% in the second half of 2021. The increase in the NEER was supported by higher international export commodity prices which resulted in the appreciation of some commodity-exporting emerging market currencies against the US dollar during the first quarter of 2022. However, the NEER declined in April and early May 2022, largely due to the strength of the US dollar after a 50 basis point increase in the US federal funds rate to combat rising inflation. The ongoing conflict between Russia and Ukraine, and the subsequent sanctions imposed on Russia by many countries, as well as the reimplementation of strict COVID-19 lockdown measures in China posed renewed risks to global economic growth and caused heightened currency volatility. Although South Africa’s sovereign credit rating outlook was revised from stable to positive by Standard and Poor’s in May, the NEER increased only marginally in May and early June, in line with other emerging market currencies amid a depreciating US dollar.

South African government bond yields fluctuated widely along an upward trend in the first half of 2022, broadly tracking movements in the exchange value of the rand. Domestic bond yields were largely impacted by global events over this period, notably the invasion of Ukraine by Russia in February 2022, rising global inflationary pressures, and the subsequent tightening of monetary policy by most central banks.

Domestic money market interest rates trended higher during the first half of 2022, in line with the four consecutive increases in the repurchase (repo) rate since November 2021, and reflected fluctuations in the exchange value of the rand, higher consumer price inflation and heightened global risk aversion. Increases in the longer-term interbank rates were more pronounced than in the short-term rates. Rates on forward rate agreements (FRAs) also resumed their upward trend in April and May 2022 alongside unfavourable domestic inflation outcomes and movements in the exchange value of the rand.

Growth in the broadly defined money supply (M3) accelerated further to 8.4% in March 2022 before moderating to 7.5% in April, close to the rates recorded in early 2021. The acceleration in M3 growth reflected a strong rebound in the deposit holdings of financial companies from a deep contraction in mid-2021 and an acceleration in the deposit growth of non-financial companies. Growth in the deposit holdings of households levelled off somewhat in early 2022 as consumption expenditure increased with the further relaxation of the COVID-19 restrictions.

Credit extended by monetary institutions to the domestic private sector increased further in the first quarter of 2022 as loans to both companies and households increased. Year-on-year growth in total loans and advances accelerated from a decline of 0.8% in March 2021 to 7.0% in April 2022 as the gradual increase in demand for credit coincided with the phasing out of the COVID-19 restrictions.

The preliminary non-financial public sector borrowing requirement decreased significantly in fiscal 2021/22 compared with the previous fiscal year. The smaller borrowing requirement stemmed mostly from the much smaller cash deficit of national government, largely due to better-than-expected tax collections, while the other levels of general government and the non-financial public enterprises and corporations recorded cash surpluses.

National government’s cash book deficit decreased notably to 5.1% of GDP in fiscal 2021/22 from 9.8% in the previous fiscal year, as revenue collections improved significantly and far outpaced expenditure growth. The 26.3% increase in revenue reflected higher collections in all tax categories, with corporate income tax collections increasing the most as the mining sector benefitted from high commodity prices. Although national government’s net borrowing requirement more than halved in fiscal 2021/22, gross loan debt still increased by 8.7% year on year to R4 278 billion at the end of March 2022, representing 67.4% of GDP.