Feb. 26 (Bloomberg) -- South African economic growth unexpectedly accelerated to an annualized 5.3 percent in the fourth quarter, the fastest pace in a year, on a construction boom and a rebound in manufacturing.

Expansion picked up from a revised 4.8 percent in the third quarter, Pretoria-based Statistics South Africa said today. Growth was expected to slow to 4.4 percent, according to the median estimate of 11 economists surveyed by Bloomberg.

Construction has benefited as the government steps up spending on railways, power supplies and stadiums in preparation for the 2010 FIFA World Cup. That has helped to ease the impact of four interest rate increases last year, keeping the growth rate above 4 percent in every quarter of the past three years, prolonging the economy's expansion since September 1999, the longest on record.

``It's an exceptional number,'' said Russell Lamberti, an economist at Econometrix Treasury Management in Johannesburg. ``This is evidence that investment spending is really a strong driver of growth.''

The rand gained to 7.603 against the dollar as of 3:16 p.m. in Johannesburg from 7.663 before the data was released. The benchmark FTSE/JSE Africa All Share index gained as much as 1.7 percent.

For the whole of 2007, growth slowed to 5.1 percent, the statistics office said, compared with 5.4 percent in 2006, the fastest pace in 25 years. Growth has averaged 4.7 percent in the past five years, compared with 2.7 percent between 1998 and 2002.

Construction Boom

Construction surged an annualized 14.2 percent in the fourth quarter, little changed from 14.7 percent in the previous three months. Manufacturing, which accounts for 16 percent of the economy, climbed 8.2 percent, rebounding after a strike cut output in the third quarter.

The government, under pressure to expand power generating capacity after outages shut gold and platinum mines last month, raised its infrastructure spending by 18 percent to 568 billion rand ($74.6 billion) over the next three years.

At the same time, companies such as Pretoria Portland Cement Co., the nation's largest producer of the building material, and ArcelorMittal South Africa Ltd., Africa's biggest steelmaker, are expanding to meet rising demand. Investment climbed to 21 percent of GDP in the third quarter, compared with 18 percent at the beginning of 2006, according to central bank data.

Growth Forecasts

The electricity shortage has crimped mining and manufacturing output this year, while slower global growth cuts export demand, prompting Finance Minister Trevor Manuel to cut his growth forecast for this year to 4 percent from 4.5 percent. The government won't reach its 6 percent growth target by 2010, forecasts released by the National Treasury on Feb. 20 showed.

``We expect growth of about 4 percent this year, which implies a sharp moderation in each of the quarters,'' said Adenaan Hardien, chief economist of African Harvest Fund Managers in Cape Town. ``We expect weaker growth in mining and manufacturing, mainly because of the electricity crisis, but also because of higher interest rates.''

Slower growth may hinder a government goal of slashing the unemployment rate to 14 percent by 2014, from 25.5 percent currently.

Mines Shut

Mining fell an annualized 1.7 percent in the fourth quarter after expanding 4 percent in the previous three months, the statistics office said. Safety concerns prompted the government to force some companies, such as Anglo Platinum Ltd., the world's largest platinum producer, to shut mines last quarter.

The central bank raised its benchmark interest rate by 2 percentage points to 11 percent between June and December, crimping credit demand and sales of cars and furniture.

The finance, real estate and business services industry, representing 20 percent of the economy, rose 8.5 percent last quarter, compared with 12.3 percent in the previous three months. Growth in the retail and hotels industry slowed to 2.1 percent from 4.5 percent, the statistics office said.

The economy expanded 4.6 percent in the fourth quarter compared with the same period a year earlier, down from a revised 5.2 percent in the third quarter.

To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net; Garth Theunissen in Johannesburg at gtheunissen@bloomberg.net

Last Updated: February 26, 2008 08:46 EST