The economy contracted after growing by 0.4% in the first quarter, with trade, manufacturing and mining among the main drags on growth.
South Africa’s gross domestic product (GDP) contracted by 0.2% in the second quarter of 2026, following growth of 0.4% in the first quarter, Stats SA reported on Tuesday. The decline was a surprise to many economists.
The trade, catering and accommodation industry declined by 1.9%, subtracting 0.2 of a percentage point from overall growth. Activity decreased in wholesale trade, motor trade, and food and beverages.
Manufacturing contracted by 1.8%, also subtracting 0.2 of a percentage point. Seven of the 10 manufacturing divisions recorded negative growth. The largest negative contributions came from food and beverages; furniture and other manufacturing; and basic iron and steel, non-ferrous metal products, metal products and machinery.
North-West University Business School economist Professor Raymond Parsons said the figures confirmed the setback suffered by South Africa’s economy and other economies during the recent global energy shock.
“The prospect at the beginning of 2026 that the economy would immediately build on the incipient recovery seen in the second half of 2025 has unfortunately not been realised,” Parsons said.
He said finance, business services and transport remained leading sectors, while mining and manufacturing were lagging. Gross fixed capital formation, which is important for sustained, job-rich growth, had also disappointed.
Parsons said mixed high-frequency economic data from the third quarter suggested that the recovery had been interrupted and delayed, rather than definitively derailed.
Professor Waldo Krugell, an economist at North-West University, said the contraction had surprised economists. Market expectations had been for 0.1% growth.
“It’s true that it’s already water under the bridge, but it’s important to keep an eye on the scoreboard, even though it only gets updated this late,” Krugell said.
“Slow economic growth means few new jobs and few salary increases.”
Krugell said that a contraction, like the one the manufacturing sector is experiencing, means job losses. “An economic contraction could result in weaker investment and growth prospects, while several important macroeconomic ratios were based on the size of the economy.”
Dr Lerato Ntuli, an economist at Anchor Capital, said this was the first quarterly contraction since the third quarter of 2024.
Ntuli said annual growth had slowed to 0.9%, below the market expectation of 1.2%. She attributed the weaker outcome partly to the effect of the Middle East conflict and higher global oil prices.
“The trade, catering and accommodation industry contracted by 1.9%, while manufacturing declined by 1.8%, with both sectors subtracting 0.2 percentage points from overall growth,” Ntuli said.
She added that mining output fell by 3.0%.
Frank Blackmore, lead economist at KPMG, said the sectors that contracted from the first quarter were mining and quarrying, manufacturing, and trade, catering and accommodation.
He said mining activity depended heavily on resource prices, while manufacturing continued to face infrastructure challenges, including unreliable electricity and water supply.
Reza Hendrickse, portfolio manager at PPS Investments, said the decline reflected weakness in cyclical sectors rather than a broad-based deterioration across the economy.
“The trade sector was the largest drag on growth, declining by 1.9%, while manufacturing contracted by 1.8% and mining by 3.0%,” Hendrickse said.
He said the mining decline was driven mainly by lower production of platinum-group metals, manganese ore, gold and iron ore. Transport and communication, finance, government services and personal services partly offset the weakness.
Lara Hodes, an economist at Investec, said South Africa had made progress with reforms aimed at supporting investment and economic growth, but further reforms were needed to achieve a significant and sustainable improvement in growth.
Hodes said the Middle East conflict had affected supply chains, prices and demand, weighing on economic activity.
yogashen.pillay@nationalmg.co.za