South Africa’s real gross domestic product (GDP) at market prices on a quarter-on-quarter (q/q) seasonally adjusted annualised (saa) basis rose by 4,7% in the first quarter of 2007 from 5,6% in the fourth quarter of 2006, Statistics South Africa (Stats SA) said on Tuesday.
GDP was also reported to have risen 5,4% on a year-on-year basis from a revised 6,2% (6,1%) y/y reported in the fourth quarter last year.
Growth was expected to have increased by 4,8% on a quarter-on-quarter saa basis and by 5,1% y/y according to consensus surveys undertaken by I-Net Bridge.
The range of forecasts for quarterly growth was from just 3,8% q/q to 5,3% q/q.
The main contributors to the increase in economic activity for the fourth quarter of 2006 were the finance, real estate and business services industry (1,1 of a percentage point); the manufacturing industry (0,8 of a percentage point); the wholesale and retail trade, hotels and restaurants industry (0,7 of a percentage point); the transport and communication industry (0,6 of a percentage point) and general government (0,5 of a percentage point).
The seasonally adjusted real annualised value added by the non-agricultural industries (excluding the impact of the volatile agriculture industry) for the first quarter of 2007 increased by 4,6%, Stats SA added.
The GDP estimates are preliminary, and may routinely be revised, Stats SA added.
The first quarter GDP is the 34th consecutive quarter of positive growth since 1998, although the impact of rate increases since June 2006 has brought the pace of growth down.
The data will help participants in both the fixed income and equity markets to determine the future direction of interest rates and the pace of companies’ earnings growth.
GDP was up 5% in 2006 from the 5,1% year-on-year (y/y) reported in 2005 which was the fastest pace of growth since 1984.
George Glynos, a market analyst at ETM, said it was only slightly softer than expected.
“I haven’t had time to study the breakdown yet, but it still reflects a healthy growth and I suspect that with this kind of underlying resilience to the South African economy, it leaves the Reserve Bank with a little room within which to manoeuvre if they still want to raise interest rates. But it’s still a positive number.”
Chris Hart, Absa capital’s economic strategist said: “Roughly in line with expectations, but it does reflect a slowdown in the economy and takes the pressure off [the South African] Reserve Bank to hike interest rates.”
Annabel Bishop from Investec said the data did not change their view that interest rates would be hiked by 50 basis points in June.
“We continue to believe that CPIX inflation will breach the upper limit of the inflation target at least once in the next twelve months, and may even do so with the publication of the figure later this week.”
Goolam Ballim, Standard Bank’s chief economist, said the economy did not look to be losing momentum.
“However, the trend growth rate seems anchored at around 4,5%, which is enormously constructed by historical contrasts and is supportive of sustained labour absorption.” – I-Net Bridge