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South African Growth Probably Slowed in Second Quarter as Exports Faltered
South African economic growth probably slowed in the second quarter as manufacturing output lost momentum, offsetting the impact of the soccer World Cup that lured thousands of visitors to the country.
Gross domestic product rose an annualized 3.9 percent compared with the first quarter, when the economy grew 4.6 percent, according to the median estimate of 16 economists surveyed by Bloomberg. Statistics South Africa is scheduled to publish the data at 11:30 a.m. in Pretoria tomorrow.
The World Cup, which ended on July 11, probably added 0.4 percentage points to last quarter’s growth rate as tourists’ spending on hotels, restaurant meals and sports goods climbed, according to Ilke Smit, an economist at Metropolitan Asset Managers. That wasn’t enough to offset a slowdown in manufacturing, which accounts for 15 percent of the economy, as export demand waned.
“We’re very susceptible to the world economy because of our exports,” Smit said in an interview in Johannesburg on Aug. 20. “The World Cup contributed to growth, but manufacturing slowed down and mining contracted.”
Mining output dropped an annual 7.6 percent in May and 4.9 percent in June, according to data from the statistics office. The purchasing managers index fell in the second quarter, dropping below 50 in June, indicating a contraction in factory output, according to Kagiso Securities Ltd.
Mounting Unemployment
Africa’s biggest economy will probably expand 2.9 percent this year, compared with a 1.8 percent contraction in 2009, with the main risks “emanating from the global economy,” central bank Governor Gill Marcus said on July 22. Finance Minister Pravin Gordhan said on Aug. 19 that the economy needs to grow 7 percent a year over the next two decades to boost jobs and cut poverty.
Job losses have continued to mount even as the economy recovers. The unemployment rate of 25.3 percent is the highest of 62 countries tracked by Bloomberg.
The slowdown in economic growth may prompt the Reserve Bank to cut its benchmark interest rate on Sept. 9, after lowering it seven times since December 2008, economists said. Inflation eased to a four-year low of 4.2 percent in June, the statistics office said on July 28.
“The interest rate cuts to date have not been as stimulatory as some believe, and a further easing in South Africa would be helpful,” Annabel Bishop, an economist at Investec in Johannesburg, said in a note to clients before today’s data.
To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net
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