SA economic growth slows

2012-05-29 12:00

Pretoria - South Africa’s economic growth slowed to 2.7% in the first quarter of 2012 on a seasonally adjusted and annualised basis, compared with 3.2% rise in the fourth quarter of last year, data showed on Tuesday.

On an unadjusted year-on-year basis, economic growth was at 2.1% in Q1 from 2.9% in the fourth quarter.

A Reuters poll of 12 economists last week forecast quarter-on-quarter growth of 2.4% in Q1 while year-on-year expansion was seen at 2.2%.

Kevin Lings, chief economist at Stanlib said: “Better than what most people were looking for. The surprise would be manufacturing being as strong as it was simply because we saw quite a shock number for the March number so clearly it wasn’t quite as badly as impacted.

“We know mining was weak because of all the closures and strike activity, especially around platinum. The other sectors held up reasonably well especially manufacturing.

“Overall this is not a bad reading. A nice pickup in construction, that will also stand out as an encouraging positive because construction has gone through quite a difficult phase over the last two years.

Peter Attard Montalto an economist at Nomura said: “Mining is the main drag on growth at the moment ... For us the real slowdown is still to come from Q2 and there is evidence of domestic demand turning in these numbers already albeit still tentatively.

“These numbers certainly are not enough of a shock to the system for those expecting a faster cut in rates but with more evidence of a slowdown building in the months ahead and depending on the eurozone situation a September cut is still a possibility albeit still not our baseline just yet.”

The rand weakened to R8.3540 against the dollar by 09:49 GMT from R8.3470 before the data was released at 09:30 GMT.

The yield on the three-year government bond was at 6.375% from 6.365% prior to the data.

Recovery in Africa’s largest economy has been hesitant since a 2009 recession. The central bank has left interest rates at 30-year lows to help support economic growth.

A festering debt crisis in Europe, which takes in a quarter of South Africa’s exports, is weighing on domestic growth prospects. The South African Reserve Bank said last week the risks posed to the domestic economy from the crisis had intensified.

The Finance Ministry has said growth should come in at 2.7% this year, the same as IMF projections, while the central bank sees slightly better growth of 2.9%.

The economy needs to grow by 7% on a sustained basis to make a dent on a 25% unemployment rate.