As many analysts described the contraction of just over 16% between the first and second quarters as a “crash” and a “plunge”, Steven said: “Everyone expected Q2 GDP to be horrendous and show a material decline following the near total shutdown of South Africa’s economy.”
Describing GDP as “far from a precise number”, Steven said the measure “mostly tells us what we already knew, well after the fact”.
GDP will tell us, for example, “when we were in a recession, several months after we knew or felt that the economy was weak”.
While GDP is a useful measure for describing the size of the economy and its growth rate, Steven said GDP growth did not necessarily correlate with stock market performance.
“The stock market has long discounted good or bad GDP numbers well before the actual number is ‘known’, which is why the GDP number almost never moves the stock market, even during this momentous GDP decline.”
Steven was hopeful that the poor economic performance would encourage the government “to address the structural impediments containing South Africa’s economic potential”.
For consumers, he added, this should be “another reminder to be prudent with their finances, to live well within their means, to save adequately, invest in well diversified portfolios and minimise their fees”.
‘Not everything that can be counted counts’
10X CEO Steven Nathan urged consumers not to read too much into SA’s recently released GDP numbers for the second quarter saying “most people knew that GDP would be terrible”.
