Economy

Mining, euro crisis drag down growth

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30 November 2011

South Africa's gross domestic product (GDP) growth came in at a lower-than-expected 1.4% in the third quarter, with the country's mining and manufacturing sectors struggling as Europe's debt crisis undermined demand for commodities and exports.

"The seasonally adjusted real GDP at market prices for the third quarter of 2011 increased by an annualised rate of 1.4% compared with an increase of 1.3% in the second quarter of 2011," Statistics South Africa (Stats SA) reported on Wednesday.

A Bloomberg survey had expected the country's GDP to come in at 1.9% in the third quarter.

The finance, real estate and business services, wholesale, retail and motor trade, catering and accommodation industry as well as general government services were the main contributors to GDP growth over the period.

The third quarter showed a sharp fall in mining (down by 17.4% quarter-on-quarter) as well as a fall in manufacturing (down by 1.9% quarter-on-quarter). Stats SA's Gerhardt Bouwer attributed the fall in mining to strike action.

Consumers 'slightly cautious'

Standard Bank had expected the GDP to come at 1.6% quarter on-quarter, with senior economist at the bank, Thabi Leoka, saying the mining and manufacturing sectors had been significantly disappointing, continuing to struggle through the year.

"We think they will remain negative next year. They will undermine growth seeing that they are export-driven," she explained, adding that in the current sluggish global growth these sectors were unlikely to turn the corner as quickly.

Leoka said there could be some pick-up in December when consumers were expected to spend over the holidays. However, consumers were "slightly cautious".

The agricultural sector showed a fall of 4.3% in the third quarter. "The agricultural sector has posted negative growth in all three quarters and is likely to remain in negative territory for the remainder of the year," said Leoka.

European debt crisis

Standard Bank said the challenges to GDP growth remained external in the face of Europe's debt crisis that undermined demand for exports and mining output.

Leoka added that slower growth would make it difficult for government to reach its target of creating 5-million jobs by 2020.

According to Nedbank economists, economic activity is likely to improve slightly in the final quarter with the domestic trade and services industries providing momentum supported by a relatively resilient consumer.

"Although consumers are becoming more cautious and confidence appears fragile, growing disposable income and low interest rates will probably buoy spending through the festive season."

The bank said the outlook for 2012 was becoming cloudy, with problems in Europe intensifying.

"The market and the Reserve Bank largely anticipated subdued growth for the third quarter. While the figures will not surprise, they will also not provide comfort," said Nedbank.

According to Stats SA, real annual GDP increased by 2.9% in 2010 following a decrease of 1.5% (revised from a decrease of 1.7%) in 2009.

Source: BuaNews