Growth beats expectations but concern lingers

GROWTH in the economy was stronger than expected during the first quarter of this year, with a robust rise in manufacturing output countering a steep drop in mining production, data showed yesterday.

But the news did little to dispel concern over the effect that Europe’s sovereign debt crisis may have on the domestic economy, particularly if there is a “disorderly” exit of Greece from the euro zone.

Growth in gross domestic product (GDP) moderated to 2,7% from 3,2% in the previous quarter, well above consensus forecasts for a 2,3% rise, Statistics SA said yesterday.

The rise was driven by a surprising jump in manufacturing output, which rose 7,7% compared with the final quarter of last year, up from 4,2% in the previous quarter, Stats SA said. The figures are seasonally adjusted and annualised.

However, mining production contracted by 16,8%, mainly due to the prolonged strike at Impala Platinum, which stalled activity at the world’s second-biggest platinum producer for about six weeks.

The figures “show the economy is still taking strain”, Stats SA deputy director-general Joe de Beer said. “Growth is broad-based, yet it is dominated by poor performance in the mining industry,” he said.

Mining trimmed nine percentage points off the economy’s pace of growth during the first quarter.

Mr de Beer said it would make sense to focus on year-on-year growth rates, which paint a more subdued picture of the economy.

According to this measure, the economy expanded by 2,1% versus the first quarter of last year, and manufacturing edged up by 1,1%.

Manufacturing Circle executive director Coenraad Bezuidenhout said he was puzzled by the strong quarterly manufacturing growth. Members of the industry group had experienced a “weaker” first quarter and expected the trend to carry on for the rest of this year, he said.

The rand’s depreciation should help to support manufacturing over the rest of the year, as it makes local exports more competitive and damps demand for imports.

But the economy’s secondbiggest sector will be constrained by the global slowdown as well as the likelihood of further industrial action and electricity shortages.

“The outlook for the remainder of 2012 is becoming increasingly murky. The global economy is the key uncertainty,” Nedbank economist Nicky Weimar said.

SA was “vulnerable” to anticipated recession in the euro zone, given that the region accounted for more than a quarter of export sales last year, she said. It also takes a third of locally manufactured exports.

The Stats SA data showed agriculture pulled out of a recession that had lasted a whole year, expanding by 3,4% compared with the final quarter of last year, seasonally adjusted and annualised.

Construction also put in a good performance, rising 3,8% — its biggest rise in two-and-a-half years.

Growth in the financial sector, the economy’s biggest, quickened to 4,1% in the fourth quarter from 2,3% in the previous quarter.

Wholesale retail and motor trade, along with accommodation, slowed to 3% from 5,2% in the third quarter. This backs the view that consumer spending, the economy’s main engine, will moderate this year.

Economic growth for the year is expected to slow to 2,8% this year from 3,1% last year.