Economy

Weaker manufacturing hits GDP growth

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24 November 2010

South Africa's real gross domestic product (GDP) growth slowed to 2.6 percent in the third quarter of 2010, falling below market expectations, with a contraction in manufacturing and weak construction activity among the factors to blame.

The figure is the lowest to date for the year, the markets having expected above 3 percent growth. GDP growth for the second quarter was revised down to 2.8 percent from 3.2 percent, Statistics South Africa (Stats SA) reported.

Addressing journalists in Pretoria on Tuesday, Stats SA Deputy Director-General Rashad Cassim said the numbers showed that South Africa's economy was far from reaching the 7 percent growth needed to turn the tide on job creation and poverty.

He fingered the manufacturing sector as one of the main culprits responsible for the weak growth. "I suspect that part of the problem is the exchange rate," Cassim added.

According to Stats SA, manufacturing showed negative growth of five percent, partly due to lower production in the motor vehicle, parts and accessories sector as a result of the recent strike.

The mining and quarrying, wholesale, retail, motor trade and accommodation industries were the major contributors to the 2.6 percent figure.

General government services in the third quarter slowed to 0.4 percent from a seasonally adjusted 4.6 percent in the second quarter. "The important point is that the low number has little to do with the government cutting jobs," Cassim said, pointing to the impact of the strike action.

Slight improvement expected

"The softer trend was further aggravated by a combination of weak construction activity and slower growth in domestic trade and accommodation, as well as transport and communications off the high base established in the second quarter," Nedbank said in reaction to the data.

"These developments largely offset the impact of a strong rebound in mining output, higher agricultural output and stronger activity levels in the broader finance and real estate industries."

Nedbank expects growth to improve slightly in the last quarter as manufacturing bounces back from strike disruptions, and forecasts economic growth of between 2.8 percent and 3 percent in 2011.

Stats SA said that real annual GDP decreased by 1.7 percent in 2009 after a 3.6 percent increase (revised from 3.7 percent) in 2008.

Source: BuaNews



	Volkswagen South Africa's plant in Uitenhage, Eastern Cape is the largest vehicle factory in Africa (Photo: MediaClubSouthAfrica.com / Volkswagen South Africa)