SA shrugs recession shackles

Johannesburg - There was relief as South Africa emerged from its first recession in 17 years in the third quarter of 2009 by notching up 0.9% growth, driven by a rebound in the manufacturing sector which had been sent reeling during the worst times.

The figures were in line with consensus expectations. Though the consensus was for positive growth, individual economists differed widely in their forecasts, because of uncertainty over revisions by Statistics in the way gross domestic product (GDP) is calculated.

The revisions led to first-quarter GDP being revised downwards to a negative growth rate of 7.4% from negative growth of 6.4% previously. (All figures are quarter-on-quarter, seasonally adjusted and annualised growth rates, unless otherwise stated.)

However, despite the sharp downward revision in the first quarter, economists don't expect the overall GDP growth rate for the year as a whole to be materially different from the anticipated -2% levels.

Stanlib economist Kevin Lings said that although growth in the third quarter was obviously good news, it should be seen in the context of a manufacturing sector that had been severely hurt during the recession. The industry was in line for a recovery.

"In South Africa, as in the rest of the world, the recession happened in fast forward, hitting the production side of the economy hard.

"Inventories were depleted, and while that was happening, machines were shut off. Now that there's no more inventory left, firms are producing again. But their future will depend on the consumer, who remains under pressure," Lings said.

Econometrix economist George Glynos pointed out that manufacturing output rose 7.6%, while the retail sector was down 1.1%.

Also noticeable, he said, was the fact that strong growth in the construction sector had cooled down to 6.1%.

This sector had notched up stellar growth rates in the past and growth was being calculated off a high base. Overall, however, Glynos said growth was a bit stronger than he had anticipated, which boded well for 2010.

He expected growth of 2.2% to 2.5% for next year, stronger than Finance Minister Pravin Gordhan's 1.5% forecast. Lings expected growth of 2.5% in 2010, helped by a 0.5% to 0.7% fillip from the 2010 Fifa World Cup.

Standard Bank economist Danelee van Dyk was relieved that the economy was out of recession, but disappointed that the growth rate in the third quarter had not reached her expectations.

"Growth was driven by slower de-stocking and the spillover from a healthier global economy, which will continue into next year. We are optimistic about SA achieving a growth rate of 3% in 2010."

- Fin24.com