Economy

Economy grows by 4.8% in first quarter

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1 June 2011

South Africa's economy grew by a higher-than-expected 4.8% in the first quarter of 2011, driven by increased manufacturing activity and despite a contraction in agriculture due to floods in January and February.

Seasonally adjusted real GDP at market prices for the first quarter of 2011 increased by an annualised rate of 4.8% compared with an increase of 4.5% (revised from an increase of 4.4%) in the fourth quarter of 2010, Statistics South Africa (Stats SA) said on Tuesday.

First-quarter GDP growth had been expected to come in at around 4.2%.

Manufacturing contribution

According to Stats SA, contributors to the economic activity were the manufacturing sector, which contributed the most to the economy at 2.2%. This sector has a relative size of 15.1% of the economy.

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

"We were surprised by the number. It is a very good number and good showing by the manufacturing sector," said Standard Bank senior economist Johan Botha.

Economic activity in agriculture, forestry and fishing industries reflected negative growth of 2.6% partly due to a negative contribution by field crops. This could have been due to flooding experienced in January and February, said Stats SA GDP manager Kedibone Mabaso.

"Agriculture has been doing well, but it is very volatile," said Botha.

Economy 'gaining traction'

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

"I think the economy is gaining traction now, and the question is what the implication is for interest rates, making it more difficult for the MPC's [Reserve Bank monetary policy committee's] next meeting, because growth is stronger than what was expected," said Botha.

"The Reserve Bank may want to see another bout of strong growth before making a decision."

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

Source: BuaNews



	Acoustex, a company based at the Coega Industrial Development Zone in the Eastern Cape, makes sound-dampening components for cars. Here, car headrests are being sewn together (Photo: Rodger Bosch, MediaClubSouthAfrica.com)