Johannesburg — THE economy's disappointing growth performance in the fourth quarter of last year helps to cut through some of the euphoria and excessive expectation that has built up around the issue.

It also highlights the extent to which industries with an internal focus are riding the crest of the growth wave, while those that rely on external factors, such as the rand exchange rate, for their success are struggling to get on board.

According to data released by Statistics SA on Tuesday, the economic growth rate slowed to a seasonally adjusted and annualised 3,3% in the fourth quarter -- far below market expectations of 4% -- from 4,2% in the third quarter.

Overall, gross domestic product (GDP) grew an estimated 4,9% last year, slightly slower than the 5% predicted by Finance Minister Trevor Manuel in his budget speech last month, but considerably faster than the 4,3% pencilled in by government this time last year.

It was also a sizeable improvement on the 4,5% rate of GDP growth recorded in 2004.

In his budget speech, Manuel said that "when the full accounting is done towards the end of this year, we may indeed find that our economy grew 5,5% or 6% last year", and that 5% annual growth was likely over the three-year planning period of the 2006 budget, ending in 2009.

He may ultimately be proved right, as he has been before, but the latest Statistics SA figures suggest some caution is needed when proclaiming the economic growth rate to have already reached the heights intended to be achieved by government's accelerated and shared growth initiative without the interventions envisaged in the initiative having taken place.

The flipside of this optimism, as Brait economist Colen Garrow points out, is that we are now disappointed with a level of growth that would have been distinctly pleasing only two years ago.

"The irony is that it wasn't so long ago that South Africans were saying that the economy needs to grow at 3%. Now we're looking at 3,3% and saying it's dismal. It shows how the expectations have shifted," Garrow says.

Statistics SA's breakdown of the various sectors and their contribution to GDP growth paints an interesting picture, with the production side of the economy -- that with the greatest potential to create jobs -- continuing to be hamstrung by the strong rand, while the supply sectors benefit from the rand and the country's interest rates in 25 years.

The mining and manufacturing sectors, which together make up almost 23% of GDP, both contracted in the fourth quarter; the former 4,5% and the latter 0,3%.

The contraction in the mining sector had the effect of subtracting 0,3 percentage points from the fourth quarter's growth, while manufacturing -- the economy's second-largest sector -- made no contribution to the 3,3% expansion.

Construction, wholesale and retai, trade and transport, storage and communication, which account for 26,5% of GDP, grew apace.

In line with the consumption boom driving economic growth, helped by the strong rand's price-cutting effect on imported goods, wholesale and retail trade contributed 1,2 percentage points to the quarter's 3,3% growth.

Growth in the finance, real estate and business services sector, which at 19,5% makes the biggest contribution to GDP, was more modest, coming in at 3,7%.

Finance, real estate and business services contributed 0,7 percentage points, and transport, storage and communication 0,6 percentage points to overall growth.

Kevin Lings, economist at Stanlib Asset Management, says this growth pattern "points to a clear divergence in performance between domestically oriented industries (retail and construction) and externally oriented sectors (mining and manufacturing)".

"It is clear that some manufacturing industries have benefited from the strong consumer and housing activity (cement, bricks, cars), while others have been overwhelmed by relatively cheap imports (textiles). The structure of our manufacturing base is changing."

While the strong growth in retail, construction, transport and communication activity is "extremely encouraging", he says, "the slump in manufacturing activity is a concern given its relative importance in the economy".

"This poses a key question: can we turn the current low inflation/high consumer growth momentum into a high fixed investment/high employment growth environment? In order to achieve sustained high growth we need to not only increase infrastructural fixed investment but also increase the base of manufacturing activity.

"In this regard, it is clear that interest rates have played their part and that incessant calls for substantial currency weakness would lead only to higher inflation and higher interest rates, which would in turn impact negatively on consumer activity.

"Rather, it is now time for the other key components of economic policy -- industrial, labour, competition, trade, and so on -- to play their roles to promote local industry," says Lings.