Third quarter GDP in at 4.7%
The main contributors to South Africa's increased economic activity was the finance, real estate and business services, retailers, construction, transport and general government sectors.
This year's third quarter GDP was down 0.3 of a percentage point from first quarter activity, and up 0.3% on the second quarter figure of 4.4%.
Finance, real estate and business services constituted 2.5 percentage points, whilst wholesale, retail and motor trade were 0.6 percentage points. Construction came in at 0.5 percentage points, and the general government sector registered 0.4 of a percentage point of GDP.
“The seasonally adjusted real annualised value added by the non-agricultural industries increased by 5.1% during the third quarter of 2007, following annualised increases of 5.1% and 4.4% during the first and second quarters respectively,” said Stats SA.
Russell Lamberti from Econometrix Treasury Management (ETM) told BuaNews, Tuesday that the third quarter GDP figures have come in significantly higher than was expected.
“It was a good surprise as we obviously don't want to see an end to growth in the economy.
“The GDP figure was very strongly buoyed by the financial and construction sectors; [however], whilst growth is always positive, it's sometimes the quality of growth that's more important.
“The financial sector – which is currently the biggest driver of the economy – is unfortunately not a very labour absorbing industry.”
Three sectors of the economy South Africa must look to grow, he said, was manufacturing, construction and mining as these will create substantial employment opportunites.
“The lack of growth in the manufacturing sector has been particularly worrying, with the past two quarters both experiencing negative growth.
“This, in effect, means the manufacturing sector in South Africa is in recession, and retail and wholesale are also slowing down.”
He alluded to the fact that construction growth is not being driven by residential demand, [which is an indication that mortgage loans are reducing], but by strong infrastructural spending by government on things such as roads and housing developments.
With the economy expanding, Lamberti explained that it opened up the door for another interest rate hike when the Monetary Policy Committee (MPC) meets next week.
“An interest rate hike in December is an almost foregone conclusion, and the debate on whether the Reserve Bank will raise the repo rate is closed,” he said.
Debate has already shifted to the first MPC meeting to take place next year.
Lamberti said aspects of the economy were starting to slow, and obviously depending on which sectors experience growth in the fourth quarter of 2007, will affect Governor Tito Mboweni's decision.
“I didn't think they would hike in October but they did. I just hope they exercise better judgement at the meeting next year and don't hike the interest rate.”
The Reserve Bank has been steadily increasing the repurchase rate to commercial banks resulting in the knock-on increase in interest rates to since the inflationary cycle began in June 2006.
The Bank has raised the repo rate 150 basis points since June this year in an attempt to curb rampant consumer spending, and also instituted the National Credit Act on 1 June 2007 to block the granting of irresponsible loan applications by financial institutions.
The Consumer Price Index excluding mortgage costs (CPIX) came in outside the Bank's inflation target band of 3 to 6% at 6.7% year-on-year in September 2007, giving it further reason to raise the interest rates next week.
Article published courtesy of BuaNews