GDP growth slows in second quarter

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 4,5% in the second quarter of 2007 from 4,7% in the first quarter of 2007, Statistics South Africa (Stats SA) said on Tuesday.

This comes after GDP rose as high as 5,6% in the fourth quarter of last year.

GDP was also reported to have risen 5% on a year-on-year (y/y) basis from 5,4% y/y reported in the first quarter.

Growth was expected to have increased by 4,2% on a quarter-on-quarter saa basis and by 4,8% y/y according to consensus surveys undertaken by I-Net Bridge.

The range of forecasts for quarterly growth was from just 2,7% q/q to 5,1% q/q.

The main contributors to the increase in economic activity for the second quarter of 2007 were the finance, real estate and business services industry (1,5 of a percentage point); the wholesale and retail trade, hotels and restaurants industry (0,6 of a percentage point); the transport, storage and communication industry (0,6 of a percentage point), general government (0,5 of a percentage point) and the construction industry (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 second quarter of 2007 increased by 4,4% from 4,6%, Stats SA added.

The GDP estimates are preliminary, and may routinely be revised, Stats SA added.

The second quarter GDP is the 35th 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.

Ridle Markus, senior economist at Absa, said: “This is a bit of a surprise but it also makes sense following South African Reserve Bank Governor Tito Mboweni’s observation last week that there is little sign of household growth slowing.
It shows resilience of demand. Growth came mostly from tertiary sectors.”

George Glynos, market analyst at ETM, said: “The figure is a little softer than what we had anticipated. But it nevertheless reflects a solid outcome that highlights what the Reserve Bank governor has been saying, that the economy is growing at or above its potential. But that there is a need for them to remain vigilant in monetary policy.”—I-Net Bridge

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