Johannesburg - Powered by a surging manufacturing sector, gross domestic product (GDP) jumped by 3.2% in the fourth quarter of last year, coming in impressively above market expectations of 2.6% growth for the quarter and confirming that SA has well and truly left the recession behind.
Statistics SA figures show that the manufacturing sector grew by a whopping 10.1% in the fourth quarter after growth of 7.6% in the third quarter.
These two quarters followed a period of deep recession in the industry, which represents a substantial 15% of the economy. (All figures are quarter-on-quarter, seasonally adjusted and annualised growth rates, unless otherwise stated.)
"It's not really all that surprising that GDP did so well, as the monthly Statistics SA data on manufacturing - as well as the Kagiso Purchasing Managers' Index - had both shown a strong rebound in the sector.
"The main reason for the manufacturing rebound is the fact that inventories had become completely depleted and new production had to happen. Inventories had been completely run down. This factor won't play such a big role this year, and we can't expect manufacturing to continue to grow at the strong rates we have seen," Stanlib economist Kevin Lings said.
Nevertheless, Lings expected an economic growth rate of 3% for this year.
Stats SA said the manufacturing industry contributed 1.5 percentage points to the 3.2% growth rate. The general government sector also shone, growing by 7% in real terms and adding one percentage point to the growth rate.
The mining industry, the transport storage and communications sector, the finance real estate and business services industry, and the personal services industry each contributed 0.2 of a percentage point to the growth rate.
Standard Bank economist Danelee van Dyk said the real surprise in the figures was that the finance industry, which is the biggest sector of the economy at more than a fifth, recorded positive growth of 1.1%.
"This shows that a broader upswing is taking place. We're not just talking about isolated sectors here."
Van Dyk's growth forecast for the year was 2.6%, but she acknowledged that the economy could surprise on the upside.
Consumer demand still fragile
She said the sharp rise in government spending in the fourth quarter could show that government departments had sped up spending to make budgets, as well as frontloading of spending on the 2010 Fifa World Cup.
However, there was one sore point in the figures - the retail sector, which remained in negative territory.
The retail sector fell 0.7% in the fourth quarter after slipping 1.1% in the third quarter. This shows that, despite five percentage points in interest rate cuts between December 2008 and August last year, the consumer has yet to come to the party.
Lings said the fragility of consumer demand was the main reason why economic growth was likely to be constrained to about 3% for years to come.
Most private sector forecasts for economic growth for this year are at around 2.6% of GDP, which will follow a decline of 1.8% last year. The 1.8% decline in GDP for the year as a whole was a little better than the 2% decline economists had expected.
Finance Minister Pravin Gordhan has been conservative with his growth forecast for the year, with a prediction of 2.3% - below the market consensus. The Reserve Bank's last forecast was a tepid 2%.
- Fin24.com