There were encouraging rebounds in mining and manufacturing which expanded 11,8% and 8,1% respectively, but the impact of the prolonged drought remains evident, with agriculture contracting –0,8%, the sixth consecutive quarterly pullback, but the sector appears to be turning the corner.
The construction sector remains very weak, growing just 0,1% in 2Q16 and the outlook remains grim when digging through the gross fixed capital formation numbers. Government (-8,9%), SOE (-5,4%) and private business (-3,1%) investment all contracted, collectively delivering a –4,6% q/q fall in capital investment. The weak investment environment were reflected in the utilities sector which contracted by –1,8%, the second consecutive fall.
The tertiary sector held up well in the face of higher inflation and elevated interest rates with retail growing 1,4%, and finance, real-estate and business services delivering a respectable 2,9% q/q. The transport sector also bounced back robustly, growing 2,9% on better mining and manufacturing volumes. This upturn was also evident in the 18,1% acceleration in exports which bodes well for the current account number due in the coming weeks. Household expenditure, however, remains weak, growing just 1% q/q, and the 3Q16 GDP number is unlikely to be half as good. That said, 2016 GDP growth could well surprise to the upside but may still not be enough to avert a sovereign downgrade.