GDP grows by 3%

2013-08-27 12:58

Growth of the South African economy accelerated sharply to 3% in the second quarter, despite labour turmoil and a weak rand.

Gross domestic product grew from 0.9% in the first quarter to the fastest rate for a year, data from Stats SA showed.

The 3% clip was roughly in line with market expectations.

The manufacturing sector grew at 1.7% and a pickup in business services also contributed to the rebound in growth.

Negative contributors were the mining industry, due to lower production, and the agriculture, forestry and fishing industry.

But the figures do not necessarily signal a growth in momentum.

Strikes are continuing or looming in key sectors, including manufacturing, construction and mining.

"We wouldn't expect this pace of growth to continue going forward, there are lots of headwinds at the moment, infrastructure constraints, policy uncertainty, and global demand is not all that strong," said Dennis Dykes, chief economist at Nedbank.

"The good news is that we've had some bounce back to more normalised conditions, obviously the outlook going forward is tainted," said Dykes.

The central bank, facing weak domestic demand and a large output gap, has kept its main interest rate at a historically low 5% to boost growth.

But inflation rose higher than expected to 6.3% in July, breaching the central bank's three to six percent target band.

The bank has said it is in a difficult policy position, as the weak rand is putting pressure on inflation.

Governor Gill Marcus said in July there are underlying problems in the system outside the bank's control, such as unemployment, that are contributing to the inflation deterioration.

The bank is ready to act should inflation stay high, said Deputy Governor Daniel Mminele on August 12 at an investment conference in Johannesburg.

"The Bank stands ready, as always, to act in whichever manner is deemed prudent, in line with its mandate, to ensure that inflation does not breach the upper end of the inflation band on a sustained basis," said Mminele.

The South African economy grew by 2.5 percent in 2012, a much slower rate than many peers on the rapidly growing African continent.

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