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Teetering on brink of the 'R' word

By unknown | Nov 26, 2008 | COMMENTS [ 0 ]

Robert Laing

Robert Laing

The "R" word (recession) has been staved off for three months thanks to the third quarter's gross domestic product growth scraping in on the positive side of zero.

At current prices the third quarter's GDP was R591billion. According to Statistics South Africa, the economy grew 0,2 percent in the third quarter from the second quarter, taking inflation into account.

Stats SA revised the second quarter's GDP growth up to 5,1 percent from 4,9 percent while the first quarter was revised down to 1,6 percent from 2,1 percent. This follows a change of weighting of the 11 sectors Stats SA divides the economy into.

The two "primary" sectors, mining and agriculture, book-ended the GDP figures by showing the biggest contraction and growth respectively.

Fastest grower agriculture's lead over construction narrowed. Predictions of a negative GDP growth number were confounded by the "finance, real estate and business services" sector, which counts for a fifth of total GDP, growing 3,2 percent instead of the expected contraction.

The wholesale and retail trade, hotels and restaurants sector is in recession and manufacturing also recorded a contraction.

Economists expect today's consumer inflation data and tomorrow's factory gate inflation data to have a bigger bearing on the Reserve Bank's next interest rate decision on December 11 than yesterday's GDP numbers.

Johannes Khosa, an economist at Nedbank, said: "We believe that the first cut in interest rates could be in February 2009, followed by four more of a similar margin before the end the year."

Kgotso Radira, economist at Investec, said: "We continue to believe interest rates will remain unchanged for the remainder of the year and expect the first interest rate cut of 50 basis points in April 2009."


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