adminyear due to a surge in manufacturing output, suggesting the recovery is gaining momentum.
Finance Minister Pravin Gordhan said the economy was on track to achieve this year’s GDP target growth of 3,4 percent but said he was concerned about the impact of the rumbling debt crisis in Europe.
Africa’s largest economy came out of recession in the third quarter of 2009 but its recovery has been slow, leading the central bank to leave its repo rate unchanged at 5,5 percent this year after reducing it by 650 basis points in the two years to December 2010.
The key manufacturing sector surged by 14,5 percent in the first quarter after 4,1 percent growth in the fourth quarter of 2010, data showed yesterday.
Analysts, however, said the data did not change their view that rates would stay on hold until late this year or early next year and the rand was little changed after the data.
Gina Schoeman, senior economist at Absa Capital, said manufacturing was not “out of the woods yet”.
“It doesn’t change our view that monetary policy will start tigthening in the first quarter of next year simply because we think that although the manufacturing sector is recovering it is still not above pre-crisis levels,” she said.
Statistics South Africa said the economy grew by 4,8 percent in the first quarter on an annualised and seasonally adjusted basis, its fastest quarterly growth in a year and accelerating after a revised 4,5 percent expansion in the fourth quarter. Economists polled by Reuters had been expecting economic growth to slow to 4,2 percent quarter-on-quarter.
Gordhan said that the first quarter growth figure was a good sign for the rest of the year.
The government expects 3,4 percent growth for 2011, less than half the 7 percent the government says is needed to make a serious dent in 25 percent unemployment.
Government bonds extended losses after the GDP data. The yield on the 2015 bond rose to 7,55 percent from 7,50.
Financial markets have been divided on whether the central bank will start tightening monetary policy at the end of this year or early next year.
Gordhan told parliament that while South Africa’s moderate inflation created a basis for interest rates being at historical lows, he was worried about the impact of inflation from key trading partners China and India.
“While much of the developed world has growth of less than 3 percent, in South Africa we are still moving in the right direction and unless something untoward happens we will still hopefully achieve the 3,4 percent growth that we’ve been talking about,” Gordhan said.
“However, for many months now, indeed for almost a year, we’ve been concerned about the sovereign risk in Europe . . . and then more recently the increasing potential for inflation impacting negatively in countries such as India and China.”
The rand was largely steady after the data. It was trading at 6,8910 against the US dollar, from 6,8890 before the data was released.
At market prices:
Q1 ‘11 Q4 ’10 Q3 ’10
GDP qtr/qtr* 4,8 4,4 2,7
GDP yr/yr** 3,6 3,8 2.7
* Seasonally adjusted and annualised percent changes
** Unadjusted
Sectors (Seasonally adjusted, annualised change)
Q1 ’11 Q4 ’10 Q3 ’10
Agriculture -2,6 12,5 16,3
Mining and quarrying 1,8 17,1 33,7
Manufacturing 14,5 4,1 -4,9
Electricity, gas and water 3,3 5,6 -2,2
Construction 0,0 0,2 0,8
Wholesale, retail trade 4,4 3,5 3,3
Transport, comms 3,6 4,2 3,0
Finance, real estate 4,8 1,71,4
General govt. service 1,8 5,7 0,5
Personal services 2,7 3,3 3,1
– Reuters.
Peter Tanyanyiwa
Online Reporter