Nov. 25 (Bloomberg) -- South African economic growth slumped to an annualized 0.2 percent in the third quarter, the slowest pace in a decade, as exports weakened and higher interest rates undermined consumer spending.

The expansion in gross domestic product eased from a revised 5.1 percent in the previous three months, Statistics South Africa said in a report in Pretoria today. Growth was expected to slow to 0.3 percent, according to the median estimate of 19 economists surveyed by Bloomberg.

Africa's biggest economy may be slow to recover as the global credit crisis worsened in the third quarter, slashing demand for gold and platinum, the nation's largest source of revenue. That is adding to speculation the central bank will cut its benchmark interest rate as early as next month, after raising it six times to 12 percent since June last year.

``What's of particular concern is a sector like trade, which is now effectively in recession,'' said Adenaan Hardien, chief economist of Cadiz African Harvest Fund Managers in Cape Town. ``There is a very good chance of a rate cut as early as December and if we are not to get that then it probably makes a cut in February virtually a done deal.''

The yield on the R157 government bond, due 2010, fell as much as 0.12 percentage point to 7.94 percent from 8.06 percent before the data was released, and traded at 8.02 percent as of 3:30 p.m. in Johannesburg.

Consumer Spending

From the year earlier, the economy grew 2.9 percent in the third quarter, down from 4.4 percent in the previous three months, the statistics office said. For the nine months of this year, the economy expanded 3.7 percent, it added.

The Reserve Bank has increased its benchmark interest rate by 3 percentage points since last year, slashing vehicle sales and cutting profits at companies such as JD Group Ltd., the country's biggest furniture retailer.

Output in the retail, hotel and restaurant industry fell an annualized 6.9 percent in the third quarter after dropping 4 percent in the previous three months, the statistics office said today.

Retail sales dropped for the past five consecutive months, according to the statistics office. Vehicle sales plunged an annual 30 percent in October and have declined every month since April last year, according to an industry group.

Manufacturing

Manufacturing, which accounts for 16 percent of the economy, fell an annualized 6.9 percent in the third quarter, after expanding 14 percent in the previous three months, the statistics office said. Mining dropped 8 percent after advancing 19 percent in the second quarter, when production rebounded as electricity supply stabilized.

A slump in car sales has forced manufacturers such as ArcelorMittal South Africa Ltd., Africa's biggest steelmaker, to cut production. Fourth-quarter profit will decline ``substantially'' from the previous quarter, the company said on Nov. 5.

A global recession may push economic growth to 1.9 percent in 2009, the slowest pace in more than a decade, the Bureau for Economic Research said on Nov. 20. That is lower than the government's forecast of 3 percent and 3.7 percent in 2008, and compares with growth of 5.1 percent in 2007.

``The situation in the global economy has substantially deteriorated since the third quarter and the remainder of the year could prove much worse,'' Bartosz Pawlowski, an emerging markets strategist at TD Securities Ltd. in London, said in an e-mail. ``Today's data could add to expectations that the Reserve Bank will cut rates aggressively.''

Rate Decision

The Reserve Bank's monetary policy committee is scheduled to make its next interest rate decision on Dec. 11. Data from the statistics office tomorrow will probably show inflation slowed for a second consecutive month in October, easing to 12.5 percent from 13 percent in the previous month, according to the median estimate of 20 economists surveyed by Bloomberg.

Construction surged an annualized 15 percent in the third Quarter as the government stepped up spending on power plants and railways. The finance and real estate industry, which accounts for a fifth of GDP, rose 3.2 percent, the statistics office said.

Agriculture jumped an annualized 16 percent in the third quarter as production of field crops, horticulture and animal products increased. The government on Aug. 27 raised its forecast for this year's corn crop by 14 percent to 12.02 million metric tons, the highest in 13 years. South Africa is the biggest corn producer on the continent.

Excluding agriculture, the economy fell an annualized 0.1 percent in the third quarter, after expanding 5 percent in the previous three months.

To contact the reporters on this story: Nasreen Seria in Johannesburg nseria@bloomberg.net; Mike Cohen in Cape Town at mcohen21@bloomberg.net

Last Updated: November 25, 2008 08:47 EST