GDP growth reaches 1.3%, manufacturing falters

Seasonally adjusted real GDP at market prices for the second quarter increased by an annualised rate of 1.3% compared with a revised 4.5% (4.8%) growth in the first quarter.

GDP growth was expected to edge up to 1.5%, according to a poll of leading economists by I-Net Bridge.

"This is a bit of a disappointment as we were expecting stronger economic growth. Although the second quarter was disappointing, I am more optimistic for the third," Dawie Roodt, economist at Efficient Group said.

The unadjusted real GDP at market prices for the second quarter of 2011 increased by 3.0% compared with the second quarter of 2010. The estimates of GDP for the first six months of 2011 compared with the corresponding period in 2010 increased by 3.3%.

The manufacturing sector moved from being the main contributor to growth in the first quarter, to the worst performer in the second quarter. Figures showed that negative contributions to second quarter growth came from the sector amounted to -1.1%.

The mining and quarrying industry; and the agriculture, forestry and fishing industry each contributed -0.2%. This was the seventh consecutive quarter of zero contribution to growth by the construction industry.

Kedibone Mabaso, GDP manager at Stats SA, said the negative contribution by the manufacturing sector was primarily due to base effects.

Adenaan Hardien, chief economist at Cadiz asset management, said given that a large part of the weakness in manufacturing over the quarter was due to temporary factors, including strike activity and supply-chain constraints, the third quarter would likely see a rebound in activity in the sector.

"The economy remains in recovery, but today's figures do flag the vulnerability in overall activity, notwithstanding a rate cutting cycle that started in December 2008," Hardien said.

Economist at economists.co.za Mike Schussler said the second quarter growth data showed the extent of the "economic slowdown", which was in line with what was happening globally.

The main contributors to the 1.3% in the second quarter were: general government services with 0.8%; finance, real estate and business services with 0.6%; the wholesale, retail, and motor trade, catering and accommodation industry with 0.5%; and the transport, storage and communication industry with 0.4%.

Mabaso attributed the growth in the general government services to "the number of people who were employed by the IEC [Independent Electoral Commission] during April for the elections."

The growth in the wholesale, retail and motor trade, catering and accommodation industry was due to increases reflected by the high turnover in all major divisions in the trade industry.

Economists expected interest rates to remain on hold until early 2012 on the back of the latest growth figures.