South Africa’s third-quarter 2004 gross domestic product (GDP) growth increased by 5,6% on a quarter-on- quarter (q/q) seasonally adjusted annualised (saa) basis from a revised 4.5% (initial estimate 3.9%) in the second quarter, Statistics South Africa (Stats SA) said on Tuesday.
According to a survey of economists by I-Net Bridge, the median forecast was for 4,9% with a range from 3,8% to 6,2%.
On a real unadjusted basis, GDP increased by 3,8% y/y in the third quarter compared with a 3,4% y/y rise in the second quarter. The unadjusted real GDP at market prices for the first nine months of 2004 increased by 3,4% compared with the first nine months of 2003.
The GDP data is normally released at the end of the second month after the end of the quarter.
South Africa’s total manufacturing production soared by 11,4% q/q saa after a mild 5,9% q/q saa increase in the second quarter. Mining production rocketed up by 18,3% q/q saa in the third quarter from a small 3,2% q/q saa increase in the second quarter.
The reason why such large increases in production were not reflected in value added is that costs have increased faster than output prices, so squeezing profit margins and therefore value added.
“There have now been 24 such quarterly increases in a row. The 5,6% annualised increase in the seasonally adjusted real GDP during the third quarter of 2004 was mainly due to increases in the real value added by finance, real estate and business services (1,0 percentage point), manufacturing (1,0 percentage point), wholesale and retail trade, hotels and restaurants (0,8 of a percentage point) and transport, storage and communication (0,7 of a percentage point) industries.
“The contributions to the increase in real GDP by all other industries were lower than the aforementioned,” Pali Lehohla, the Statistician-General told a media conference.
The GDP estimates are preliminary, and may routinely be revised slightly on the basis of additional evidence that has become available by the time the subsequent quarter’s estimates are released.
In particular, the contribution of agriculture to GDP fluctuates considerably, because agricultural production is seasonal and highly dependent on unpredictable conditions.
The record quarterly annualised GDP growth rate was 21,7% in the third quarter of 1967, while the highest GDP growth rate in post-apartheid South Africa was 7,7% in the second quarter of 1996.
There were five double-digit GDP growth quarters in the 1960s, three in the 1970s and only one (fourth quarter 1983 at 10,5%) in the 1980s.
The highest GDP growth rate in post-apartheid South Africa was 7,6% in the first quarter of 1996.
What the economists say:
George Glynos, economist at MMS International: “Third quarter GDP growth of 5.6% is very impressive. It is very good news for the rand, which I see testing 5,6650 to the US dollar soon. The GDP figure confirms my view that the Monetary Policy Committee (MPC) shouldn’t cut rates in December as credit growth is too strong and a interest rate cut would fuel inflation in the future.”
John Loos, economist at ABSA: “The figure is much higher than I had expected, although my forecast was based on previous figures. We are looking at GDP growth in access of 3% this year and I think this is slightly negative for those who were hoping for an interest rates cut because it suggests that there is not an urgent need for economic stimulus by the South African Reserve Bank.”
Dawie Roodt, chief economist at the Efficient Group: “It is a fantastic number. Now I’m not so concerned about the (worse-than-expected) money supply and credit growth because the economy is bigger than we expected. It is better than my bullish estimates.
Elna Moolman, economist at Standard Bank: “We are pleasantly surprised because we’d forecast 4.7% year-on-year and expected the third quarter to be faster than the second quarter. I think the reason we were up was because the second quarter figures were revised upwards. This bodes well for the whole year in terms of growth going forward.” – I-Net Bridge