Johannesburg - Pushed lower by a slump in mining production, gross domestic product (GDP) growth in the second quarter of this year came in at a disappointing 3.2% from 4.6% in the first quarter, with economists saying the economy may have to make do with growth of less than 3% for the year as a whole.
All figures are quarter-on-quarter, seasonally adjusted and annualised percentage changes, unless otherwise stated. The GDP growth rate is lower than an I-Net Bridge poll consensus of 3.6%, showing that the effect of the 2010 FIFA World Cup on growth did not fulfil expectations.
Statistics SA figures released on Tuesday showed that mining and quarrying GDP fell by 20.8% in the second quarter of this year.
This massive fall subtracted 1.1 percentage points from the GDP growth rate. Mining only contributes 5.3% to overall GDP; if its weighting had been higher it would have had an even more devastating effect.
Also putting negative pressure on GDP was the construction sector, which grew by only 1.5% and added zero percentage points to overall GDP growth.
The construction sector contributes 3.2% to overall GDP, and was in the past a source of positive contribution to GDP as World Cup projects and government's infrastructure spending pushed construction higher. Those effects now seem to have run their course.
The World Cup effectThe most positive feature of the figures was the contribution from manufacturing output, which contributed 1.1 percentage points based on growth of 6.9%, as well as the wholesale, retail, motor trade and accommodation industry which contributed 0.7 percentage points based on growth of 5.8%. Finance contributed 0.6 percentage points to growth and government 0.5.
Nedbank economist Nicky Weimar said the figures would have looked worse without the boost from the World Cup. She expected most of the World Cup's effect to come through in the second quarter.
Weimar expected third-quarter growth also to be about 3%, and the final quarter to be below 3%. The end result was likely to be an economic growth rate of slightly below 3% for the year.
"The GDP figure certainly improves the probability of another cut in interest rates, especially if there's another surprise on the inflation front. However, if one looks at the medium term, with wage demands being high, the outlook for inflation isn't so rosy.
"It all depends on the weight the Reserve Bank places on growth versus the medium-term inflation outlook. But I would have to point out that the bank is aware of the growth picture and these figures are in line with their estimates," Weimar said.
Standard Bank economist Danelee van Dyk said she expected a weaker quarter for manufacturing in the third quarter, while mining would continue to be a drag on growth. These two sectors would be negatively affected by the weaker global growth landscape.
In addition, the premium from the World Cup would be reversed, which, she said, must have played a role in boosting GDP from the communications sector. Retail sales would also be affected negatively by the withdrawal of the World Cup boost, although growth would remain positive. Her forecast for GDP growth for the year is 2.9%.
- Fin24.com