The South African economy’s Real Gross Domestic Product (GDP) contracted to 1.3% in the second quarter of 2011, the slowest rate in almost a year.
“Real GDP at market prices increased by 1.3% during the second quarter of 2011 compared with an increase of 4.5% during the first quarter of 2011,” Statistics South Africa (Stats SA) acting executive manager of national accounts, Gerhardt Bouwer, said on Tuesday.
GDP in the first quarter was revised from 4.8% to 4.5%.
Consensus was that GDP would increase to 1.6% in the second quarter.
General government services contributed 0.8% on growth of 5.7%, while finance, real estate and business services contributed 0.6% based on growth of 2.9%, among others, to the 1.3% economic activity.
GDP manager at Stats SA Kedibone Mabaso said the increase in government services could be due to the election period in April when people were hired temporarily to assist in the running of elections.
The manufacturing industry contributed negatively at -1.1% quarter-on-quarter, falling by 7% annually. Agriculture, forestry and fishing fell by 7.8% quarter on quarter.
“We export a sizeable portion of our manufacturing output, the strong rand, on the one hand and a decline in the global economy, especially with our main trading partners,” Standard Bank’s Dr Johan Botha said.
Botha said the figures seen in manufacturing in the first quarter (14.5%) were unlikely to be repeated.
He said the South African economy was being “hit from all sides”, considering the strength of the rand and that exports were not performing well.
Nedbank economists said the weak numbers were in line with their expectations.
“The weak second quarter was in line with our expectations, but the revisions to earlier data mean that our forecasts for GDP in 2011 slips to 3.2% (3.3% previously) and for 2012, to 3.5% (3.6% previously),” said the economists, adding that economic activity will remain subdued in the third quarter.
This would be dragged down by strike action across key industries, among others.
“Weaker export demand, due to a softer global economy, will also contain growth in mining and manufacturing production. The domestic trade and services industries will continue to grow, but consumers are likely to become more reluctant as inflation edges up and doubts about job security resurface,” said Nedbank.
According to Stats SA, the seasonally adjusted real annualised value added by the primary and secondary sectors recorded a decrease of 5.2% each while the tertiary sector recorded an increase of 4% in the second quarter.
Unadjusted real GDP, at market prices for the second quarter, increased by 3% year-on-year.
“The economy is not really performing. Job creation could be put on hold and there is not much confidence in households and the same with business. You need confidence in both for growth,” said Botha.
On the deliberations of the Reserve Bank’s Monetary Policy Committee (MPC) on interest rates, Botha said it would be interesting to see what it decides on.
“Today’s GDP figures confirm that the economy slowed sharply in the second quarter. More recent indicators also suggest that the weaker trend continued into the third quarter. Added to this, there is little evidence of a convincing rebound in the world economy after a disappointing second quarter.”
“At the MPC’s next meeting in September, the mounting downside risks to economic growth are likely to dominate outweighing the upside risks to inflation,” said Nedbank economists.
Nedbank said the MPC is likely to remain cautious and more inclined to keep the current neutral stance for longer.
“Although the chances of rate cut have increased, especially if the world and local economies were to weaken even further, we still expect interest rates to remain on hold until May 2012.” – BuaNews
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