South Africa’s Economy Probably Grew 3.3% in Third Quarter

South African economic growth was probably little changed in the third quarter as a surge in the value of the rand curbed manufacturing (SFPMNSAY), while consumer spending rebounded from last year’s recession.

Gross domestic product grew an annualized 3.3 percent in the three months through September, after expanding 3.2 percent the quarter before, according to the median estimate of 20 economists surveyed by Bloomberg. Statistics South Africa is due to publish the data at 11:30 a.m. in the capital, Pretoria, tomorrow.

“The prolonged strength of the rand is curbing growth in supply sectors of the economy, predominantly in manufacturing,” Colen Garrow, an economist at Brait SA in Johannesburg, said in a note to clients. The “demand sectors appear to be performing relatively better. A steady improvement in household consumption expenditure seems to be gaining traction.”

The rand has gained 35 percent against the dollar since the beginning of last year, curtailing inflation and enabling the South African Reserve Bank to cut interest rates nine times since December 2008 to stoke spending and bolster growth. Retail sales grew an annual 6.1 percent in September, the ninth successive expansion.

The stronger currency has simultaneously eroded demand for South African exports and made imports more competitive. Manufacturing, which accounts for about 15 percent of the economy, grew an annual 1.4 percent in September, the slowest pace in 11 months.

Rate Cuts

Manufacturers are also struggling with “the uneven pace of recovery in key trading partner economies,” Kgotso Radira, an economist at Investec Ltd. in Johannesburg, said in a note to clients.

“If the outcome for third quarter GDP is lower than the SARB’s expectation this could support a rate cut in the first quarter of 2011,” Radira said.

Africa’s biggest economy will probably expand 2.8 percent this year and 3.3 percent next year, after shrinking 1.8 percent in 2009, central bank Governor Gill Marcus said on Nov. 18, when the bank cut its key lending rate by half a point to 5.5 percent.

“The domestic economic recovery remains fragile, and the adverse global developments make the growth outlook more uncertain,” she said. The decision to cut rates was appropriate “given the weakness in the supply side of the economy.”

In its mid-term budget released on Oct. 27, the National Treasury said it expects the economy to grow 3 percent this year and 3.5 percent next year.

The government is targeting 7 percent annual growth over the next two decades to boost jobs and cut poverty. The economy shed 86,000 jobs in the third quarter, leaving the jobless rate at 25.3 percent, the highest of 62 countries tracked by Bloomberg.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net.

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net.

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