SA seen out of recession

Johannesburg - South Africa's economy likely registered slight positive growth in the third quarter of this year, coming out of recession after 3 consecutive quarters of contraction, a survey showed on Friday.

The economy lurched into recession in Q1 for the first time in 17 years when GDP shrunk by 6.4% after a previous 1.8% decline as a global downturn hit the key manufacturing and mining sectors. It dipped 3.0% in the second quarter.

The median consensus from a Reuters poll of 17 economists showed the GDP number probably recovered to 0.2% in the third quarter, effectively ending the recession.

Forecasts ranged between a contraction of 1.2% and positive growth of 2.0%.

Both the National Treasury and the central bank expect South Africa's recession to end in the fourth quarter, with an overall contraction of 1.9% seen for 2009 after the economy grew by 3.1% last year.

"We expect to see the domestic economy moving out of recession in Q3'09 albeit at a moderate pace and we expect this to recovery to gather momentum into the new year," said Luke Doig, senior manager for investments and economic services at Credit Guarantee Insurance Corp.

Both gold mining and manufacturing most likely posted positive quarter-on-quarter growth rates in Q3, but evidence of still-sluggish growth elsewhere would offset this, said Standard Chartered's Razia Khan.

"While agriculture could prove to be the swing factor - it is always difficult to predict - it is likely that quarter-on-quarter growth was flat," said Khan, Africa head of research at the bank, one of 4 analysts who forecast 0 percent growth for Q3.

The central bank has slashed interest rates by 500 basis points since December last year to help the ailing economy, unwinding increases effected over a 2-year period to June 2008 as it grappled with inflation.

Consumer inflation has been above the top end of a 3%-6% target band since April 2007, but has steadily edged lower since peaking at nearly 14% in August last year.

The Reuters poll found the CPI gauge should brake slightly to 5.9% year-on-year in October, falling back into target after registering 6.1% in September.

"There is very little new information coming from surveys in October into the inflation data (but) with a 40c/litre petrol price cut (for the month), any upward price pressure ... will be subdued," said Investec economist Annabel Bishop.

The central bank said this week while there might be temporary declines to within the target range in coming months, CPI is only likely to fall inside the band on a sustainable basis in the second quarter of 2010.

The bank has kept rates unchanged in the last three policy meetings since August, citing inflationary pressures emanating from possible steep increases in electricity prices.

- Reuters