S. Africa Spending Rebounds 1st Quarter on Government

South African spending rebounded in the first three months of the year as the government boosted expenditure.

Gross domestic demand, which includes consumer, government and investments, expanded 3.5 percent in the first quarter compared with a 0.9 percent contraction in the last three months of 2012, the Reserve Bank said in its Quarterly Bulletin released in Pretoria today.

Sagging investment in the mining and manufacturing industries and slowing consumer spending may mute the impact of a rebound in overall expenditure. The economy expanded at an annualized 0.9 percent in the first quarter, the slowest pace since the 2009 recession. Consumer spending, which accounts for about 60 percent of total expenditure, continues to face pressure because of inflation, the central bank said.

“The household sector increasingly experienced higher levels of financial stress, exacerbated by rising inflation and slower growth,” the central bank said. “If the slower pace of capital spending were to continue, it could reduce the long-term potential of the economy and cause capacity constraints to develop and inflationary pressures to escalate.”

Government spending expanded 3 percent compared with a 0.7 percent contraction in the fourth quarter, while consumer spending rose 2.3 percent in the first quarter from 2.4 percent, the central bank said. Gross fixed-capital formation slowed to 2.5 percent from 4.3 percent.

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