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Johannesburg - Pummeled by rolling electricity blackouts and high interest rates, SA's battle-weary economy managed a growth rate of only 2.1% in the first quarter of this year compared with a healthy 5.3% in the fourth quarter of last year.
Among the sectors that stood out were mining, which nosedived 22% in the first quarter. "This is clear evidence of the effect of the electricity blackouts," Absa Capital strategist Jeff Gable said.
Mining subtracted 1.1 percentage points from the quarterly growth rate. (All growth rates are real, quarter-on-quarter, seasonally adjusted and annualised, unless otherwise stated.)
Manufacturing, which accounts for 16% of the economy, was also in the red, with a decline in output of 1%. The blackout factor was also evident in the category electricty gas and water, which accounts for only 2.1% of GDP.
Gable said sectors such as retail (growth of 3.6%) and construction (14,9%) had shown less of an effect from interest rate increases than he had thought would be the case.
However, the markets were expecting higher growth numbers, and some economists predicted that there would be pressure now on Reserve Bank Governor Tito Mboweni not to raise interest rates in June. Others disagreed, saying Mboweni would follow his mandate - which was to target inflation.
"We will see the interest rate factor coming through more in the quarters to come, as the tertiary sectors in the economy will be pulled down.
"But that in no way means that the governor won't increase interest rates," Gable said.
'Enormous pressure'
Mboweni was perfectly justified in raising rates given that inflationary expectations had "got away" from the Reserve Bank, and that expectations even as far out of 2010 were for inflation to be above the target.
However, Brait economist Colen Garrow said there should be "enormous pressure" on the Reserve Bank not to hike rates.
"Hiking interest rates in this environment serves no purpose. The GDP figures show that we have seen an overly aggressive monetary policy. A rethink is needed."
Nedbank economist Dennis Dykes said the growth figure was a weak number - and wouldn't be the last bad figure as SA had subsequently had further monetary tightening and a spike in the oil price.
Nedbank expected growth for the year as a whole to be only 2.9%. This is a far cry from the 4% expected by Finance Minister Trevor Manuel.
- Fin24.com