The economic growth rate slowed in the second quarter as manufacturing, agriculture and mining activity waned, the South African Reserve Bank (SARB) said on Tuesday.
“This loss of economic growth momentum was especially regrettable in light of the high and rising rate of unemployment in the country,” said Monde Mnyande, chief economist and adviser to the bank’s governor Gill Marcus.
“On a net basis very few jobs were created during the quarter, and the unemployment rate had increased further.”
The short-term indicators for these sectors suggested the third quarter was not off to a good start either, Mnyande said at the launch of the bank’s September 2011 quarterly bulletin.
Growth in real final consumption expenditure by the household sector also slowed markedly in the second quarter, alongside slower growth in households’ real disposable income.
“This follows two years during which growth in household consumption expenditure has been the mainstay of the revival in the overall domestic expenditure.
“As inflation picked up during the second quarter, not least due to the higher prices of fuel, food and electricity, wage settlements moderated somewhat and growth in economic activity slowed.”
It was not only local economic activity that was disappointing. Internationally, economic growth also slowed.
“Real growth on the global front slowed dramatically as confidence deteriorated, due largely to the persistent fiscal credibility crisis in the euro area and uncertainty about the raising of the federal debt ceiling in the United States,” Mnyande said.
“Production was also held back by supply-chain disruptions in the wake of the earthquake and tsunami that struck Japan in the first quarter of this year.”
This slowdown in global growth filtered through to the emerging market economies.
However, there was some positive news as growth in real fixed capital formation accelerated further in the second quarter.
“Provincial and local governments stepped up expenditure on housing and construction works, and public corporations continued to invest more in productive sectors of the economy, namely electricity and transport,” he said.
In the private sector, capital investment also picked up, notably among agricultural, mining and communication businesses.
“While the stronger pace of capital formation bodes very well for the future, it must be remembered that it comes off a low base, and should therefore not leave anyone with a sense of complacency,” Mnyande said.
“A more aggressive approach to productive investment spend, both in the public and private arena, is a must if the economy has to achieve its job-creating target and sustain it.”
Mnyande said the construction of residential dwellings was still “frustratingly subdued”.
The central bank’s monetary policy committee clearly expected consumer price inflation to pick up and breach the upper end of the target range of between three to five percent towards the end of the year, he said.
It should then return to within the target range by mid-2012. — Sapa