SA Economy grows faster than market expectations

South Africa’s economy grew by a higher-than-expected 4.8% in the first quarter of 2011, led by greater manufacturing activity and in spite of a shrinkage in agriculture as a result of to floods in January and February.

Seasonally adjusted real GDP at market prices for the first quarter of 2011 improved by an annualised rate of 4.8% in comparison to an increase of 4.5% (revised from an increase of 4.4%) in the fourth quarter of 2010, according to Statistics South Africa (Stats SA).

The expected first-quarter GDP growth had been around 4.2%.




Manufacturing contribution

As reported by Stats SA, contributing factors to the economic activity appeared to be the manufacturing sector, which contributed the most to the economy at 2.2%. This sector has a relative size of 15.1% of the overall economy.

The finance, real estate and business services added one percentage point to growth, and then followed by the wholesale, retail, motor trade and accommodation industry.

“All of us were definitely astonished at the number. It’s actually a really good number as well as good showing by the manufacturing sector,” said Standard Bank senior economist Johan Botha.

Economic activity in agriculture, forestry and fishing industries returned negative growth of 2.6% to some extent as a result of a negative contribution by field crops. This could possibly have been as a result of flooding encountered in January and February, said Stats SA GDP manager Kedibone Mabaso.

“Agriculture has been doing very well, however it is very volatile,” said Botha.




Economy ‘gaining traction’

During the first quarter, the seasonally adjusted real annualised value added by the primary, secondary and tertiary sectors recorded gains of 0.5%, 11.1% and 3.7% respectively.

“I believe the economy is gaining traction at this point, and the real question is precisely what the effects will be on interest rates, making it more challenging for the MPC’s [Reserve Bank monetary policy committee’s], for the reason that growth is stronger than what was expected,” said Botha.

“The Reserve Bank may choose to observe an additional bout of strong growth prior to making a call.”

The second quarter GDP numbers are expected in August, a month prior to the MPC’s September meeting. Standard Bank is expecting that the MPC will continue to keep rates as is until early January 2012.

Source: BuaNews


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