Growth in South Africa, which has the continent’s biggest economy, slowed less than expected in the first quarter as a rebound in manufacturing compensated for a slump in mining output.
Gross domestic product expanded an annualized 2.7 percent from 3.2 percent in the previous three months, Pretoria-based Statistics South Africa said on its website today. The median estimate in a Bloomberg survey of 16 economists was 2.3 percent.
“We expected growth to be a little weaker, largely because of manufacturing, but that seems to have come through a little bit better than expected,” Adenaan Hardien, an economist at Cadiz Holdings Ltd., said by telephone from Cape Town. “The weak recovery is continuing.”
Manufacturing, which makes up 15 percent of the economy, expanded an annualized 7.7 percent in the first quarter compared with a 4.2 percent gain in the previous three months. Mining production contracted an annualized 16.8 percent after increasing 0.7 percent in the previous three months. Safety stoppages, maintenance halts, and labor action slowed mining output, Gerhardt Bouwer, the agency’s executive manager of national accounts, told reporters in Pretoria.
Slower growth in Europe, where a debt crisis that began more than two years ago may lead to Greece leaving the monetary union, is curbing demand from a region that buys about a fifth of South African exports. Finance Minister Pravin Gordhan in February cut his growth forecast this year to 2.7 percent from an earlier estimate of 3.4 percent.
Not Denting Unemployment
“Global uncertainty is weighing on the economy,” Madalet Sessions, an economist at Cape Town-based wealth manager, BoE Private Clients, said in a telephone interview today. “South Africa is dependent on global growth and needs things to go well offshore, and they are clearly not going as well as we would like them to. You are not going to make a dent in unemployment numbers with growth like this.”
The rand pared gains to trade little changed at 8.3446 as of 2:12 p.m. in Johannesburg. The yield on the R157 bond due 2015 was unchanged at 6.39 percent.
The economy is growing at less than half the 7 percent pace the government estimates is needed to meet a target of creating 5 million new jobs by 2020. The jobless rate of 25.2 percent is the highest of more than 60 countries tracked by Bloomberg.
The Reserve Bank has kept the benchmark lending rate at 5.5 percent, the lowest in more than three decades, since 2010 to help stimulate the economy.
Rates on Hold
“The risks posed to the global and domestic economy from the crisis in Europe have intensified,” central bank Governor Gill Marcus said on May 24, when the bank cut its growth forecast for this year to 2.9 percent from 3 percent. The central bank was prepared to move rates either up or down, depending on the prevailing circumstances, she said.
Today’s growth data won’t have any major bearing on the direction of interest rates, which will probably remain unchanged until the fourth quarter of next year, said Hardien.
“A combination of relatively weak domestic growth, ongoing concerns about downside risks to global activity and a more favorable local inflation outcome would continue to weigh on monetary policy,” he said in e-mailed comments.
Growth in the retail industry slowed to 3 percent from 5.2 percent in the period, while financial services increased 4.1 percent, compared with 2.3 percent.
“GDP growth is still forecast to grow by 2.8 percent in 2012, assuming no further significant weakening in the global economy,” Kevin Lings, a Johannesburg-based economist at Stanlib, the money management unit of Standard Bank Group Ltd. and Liberty Holdings Ltd., said in e-mailed comments. Greece’s possible exit from the euro area “poses a significant downside risk for South Africa.”