Business Day (Johannesburg)
Ayanda Shezi
28 February 2007
Johannesburg — ECONOMIC growth accelerated to its fastest pace in more than two years in the fourth quarter of last year, far above market expectations, buoyed by a recovery in the manufacturing sector and increased investment levels.
Gross domestic product (GDP) rose to 5,6% on a seasonally adjusted and annualised rate in the fourth quarter, up from the third quarter's revised growth of 4,5%. A Bloomberg survey of economists had forecast growth of 4,8% for the fourth quarter. Growth in the last three months of last year was the fastest since the third quarter of 2004, when it was at 7,2%.
A welcome rotation in drivers of growth was also seen, following tightening in monetary policy last year.
Growth from the tertiary sector, mostly driven by demand-side factors, contributed less, while growth in the secondary sector, mostly driven by supply-side factors, contributed progressively more in the fourth quarter.
Growth is expected to slow down this year, however, as last year's interest rate hikes begin to affect consumer demand.
Increased investment by government, parastatals and the private sector is expected to offset the slowdown to some extent.
"On balance, pending infrastructural spending benefits for the broader economy, and job creation, suggest SA is on track to reach government's 6% GDP growth objective by 2010," said Brait economist Colen Garrow.
For last year as a whole, the economy grew at 5%, down slightly from 2005's rate of 5,1%.
In his budget speech last week, Finance Minister Trevor Manuel estimated that the economy would grow 4,8%. The national treasury had pencilled in growth of 4,9% for last year.
The main contributors to higher growth in the fourth quarter of last year were the finance, real estate and business services sectors, which added one percentage point to growth, while the manufacturing sector contributed 1,4 percentage points.
These two sectors are the biggest and second-biggest sectors in the economy respectively, and together account for about 36% of GDP.
The lower harvest of field crops in the quarter saw the agriculture, forestry and fishing sector subtract 0,2 of a percentage point from growth.
On a seasonally adjusted and annualised rate, value added by the sector decreased 8,4% in the fourth quarter.
"Continued contraction in the agricultural sector remains a drag on growth," Nedbank economist Carmen Altenkirch said.
Excluding agriculture, the economy grew a robust 6,2% quarter on quarter, up from 5,4% in the third quarter, and the outlook remains positive, say analysts.
"Growth prospects for the economy remain favourable, and there are encouraging signs that the sources of growth are becoming more balanced," JPMorgan economist Marisa Fassler said.
"The healthy rise in mining and manufacturing production in the final quarter of last year suggests that the weaker rand is doing good work in stimulating supply-side activity, while higher interest rates have already had a modest dampening impact on consumer demand," she said.
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