Johannesburg - The economy grew slower than expected in the third quarter, but avoided a technical recession, helped by a recovery in the key manufacturing sector, data from Statistics SA showed yesterday.
This would have been a second recession in six years.
However, the numbers indicated the economy remains under stress, and might not achieve even the sluggish 1.5 percent 2015 growth target set by the National Treasury.
Gross domestic product (GDP) was up 0.7 percent in the third quarter after contracting 1.3 percent in the three months to June, Stats SA said.
GDP expanded by 1 percent on a year-on-year basis compared with 1.2 percent growth previously.
The Reserve Bank forecasts GDP to expand to 1.4 percent in 2015, the slowest pace since the 2009 recession.
Economists polled had expected a quarter-on-quarter increase of 1.1 percent, while GDP was seen rising 1.3 percent compared with a year ago.
The rand weakened as much as 0.6 percent to R14.1695 against the dollar after the data was released and was traded at R14.1131 at 12.30pm. At 5pm, the rand was bid at R13.9953 against the dollar.
Three out of 10 sectors contracted, and all three are in technical recession: agriculture, mining and electricity.
Farming output plunged an annualised 12.6 percent in the third quarter as drought cut crops. The agricultural sector was by far the worst performer and the biggest downside surprise.
The third quarter GDP recovery was led by the manufacturing sector, which contributes slightly more than 12 percent to the economy and grew by 6.2 percent. Mining, on the other hand, fell by 9.8 percent. Manufacturing expanded for the first time since the fourth quarter of 2014.
Bleak
Elize Kruger, an economist at KADD Capital, said: “Things look bleak going forward. We just missed a technical recession and have nothing to be excited about today. It’s quite a bad outcome for the economy.”
The Nedbank economic unit said despite the weak economy, the Reserve Bank was still expected to focus on the upside risk of inflation emanating from a possible drought-induced spike in food price, another round of sharp hikes in electricity tariffs and – probably more than any other concern – the risk of even further rand weakness.
The rebound in output last quarter masks a deterioration in the economy this year, triggered by power shortages and a slump in prices of platinum, copper and other commodities.
Eskom implemented 20 days of rolling blackouts in the third quarter, compared with 59 in the preceding three months, helping to support a rebound in factory output.
Nedbank said the economic outlook remains relatively weak. It said the economy was expected to continue to grow at a similar slow pace in the final quarter of this year, taking growth for 2015 as a whole to around 1.3 percent.
Nedbank said next year was expected to be slightly weaker than 2015.
“Further restructuring is likely in mining and manufacturing, given high costs structures, slowing demand from China and the ongoing slump in global commodity prices. Further pain is also expected from the drought in key farming areas.”
It said the strain on company profits was likely to limit capital expenditure and restrain both employment and wage growth.
“This, combined with higher inflation and rising interest rates, will weigh on households, resulting in slower growth in consumer spending. We therefore expect GDP growth of only 1.2 percent in 2016.”
The Reserve Bank has little room to support growth, as it struggles to keep inflation inside the 3 percent to 6 percent target.
It increased the repo rate by 25 basis points to 6.25 percent last Thursday.
* Additional reporting by Bloomberg and Reuters
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