South African Economy Expands Slower Than Expected at 3%Rene Vollgraaff
South Africa’s economy grew at a slower pace than economists predicted in the second quarter as mining and farming output slumped.
Gross domestic product rose an annualized 3 percent, the fastest pace in a year, compared with 0.9 percent in the first three months of the year, Statistics South Africa said in a report released in Pretoria today. The median estimate of 18 economists in a Bloomberg survey was 3.3 percent.
Strikes and slumping consumer and business confidence may limit growth in Africa’s largest economy in the second half of the year, according to the Reserve Bank, which has kept its benchmark repurchase rate at 5 percent for more than a year to keep inflation under control. The bank in July lowered its forecast for economic growth for this year to 2 percent from 2.4 percent.
The Reserve Bank’s outlook is that “growth is still relatively weak,” Adenaan Hardien, chief economist at Cadiz Asset Management, said in a phone interview from Cape Town. “The fact that there are supply disruptions in mining and now also manufacturing, the economy is not really firing on all cylinders.”
Mining contracted an annualized 5.7 percent in the second quarter from the previous three months, while agriculture fell 3.7 percent, the statistics agency said. Manufacturing, which makes up about 15 percent of the economy, surged 11.5 percent as production rebounded from the first quarter, when plant maintenance and fire-related stoppages curbed output.
Manufacturing may come under pressure this quarter as a strike that began on Aug. 19 by thousands of autoworkers shut plants owned by Toyota Motor Corp. and General Motors Co. to demand higher pay. The stoppages are costing the industry 700 million rand ($67 million) a day in lost output, according to an industry group.
The rand gained to 10.3450 against the dollar from 10.3818 before the data was released and was trading at 10.3938 as of 12:30 p.m. in Johannesburg. Yields on the government bond due in December 2026 rose 2 basis points to 8.526 percent.
Policy makers have been reluctant to reduce interest rates as the rand’s 18 percent plunge against the dollar this year pushed the inflation rate above the 3 percent to 6 percent target for the first time in 15 months in July.
Construction output increased an annualized 1.2 percent in the second quarter, retail trade gained 3.2 percent and finance rose 3.5 percent, the statistics office said.