GDP growth rate flattered by strikes

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BR Manufacturing 8031 Independent Newspapers Cars are made at BMW's factory in Pretoria. Statistics SA says the main contributors to the increase in output in the fourth quarter were manufacturing and mining as strikes ended. Photo: Simphiwe Mbokazi

Johannesburg - South Africa’s growth of 3.8 percent in the final quarter of last year was better than market expectations of 3.4 percent and much better than the growth outcome of 0.7 percent recorded in the third quarter.

These figures are seasonally adjusted quarterly changes, multiplied by four to show an annual trend. For the year the economy grew by 1.9 percent, down from 2.5 percent in 2012.

Statistics SA said yesterday, as it released the data, that the main contributors to the increase in output were manufacturing (1.8 percentage points), and the mining and quarrying industry (0.8 percentage points).

Annabel Bishop, a senior economist at Investec, said the 3.8 percent growth was purely on cessation of strike action.

She said with quarterly forecasts ranging from 1.5 percent to 4.2 percent, the outcome of 3.8 percent was not a surprise, and was due to the rebound from the dismal growth rate of 0.7 percent recorded in the third quarter on substantial strike-related work stoppages.

“If the strike action had not occurred in the third quarter… the fourth quarter would have recorded a gross domestic product (GDP) growth rate of close to 2 percent quarter on quarter instead, showing the actual weak nature of underlying economic growth in 2013. The 3.8 percent quarter-on-quarter outcome is not indicative of economic strength, but merely of strikers’ return to work and a statistical base effect,” she said.

Stats SA said the mining and quarrying industry’s contribution to GDP growth represented growth of 15.7 percent quarter on quarter, while manufacturing grew 12.3 percent.

The Nedbank Group Economic Unit said the pace set towards the end of last year was unlikely to have been sustained early this year.

It said the protracted strikes in the platinum industry would undermine mining production in the first quarter. Meanwhile, signs of stress on household finances, following the unexpected hike in interest rates last month and rising inflation pressures due to a weaker rand, were likely to contain growth in consumer spending.

“However, economic activity is expected to pick up as the year progresses. The mining, manufacturing and construction sectors should benefit from a combination of strong global growth, a weaker rand and increased infrastructure spending by the public sector,” the Nedbank unit said.

Gina Schoeman, an economist at Citi Research, said the SA Reserve Bank had already been factoring in 1.9 percent GDP growth for last year at the time of the November and January meetings of the monetary policy committee.

“As such, today’s GDP release should not significantly alter the outlook for monetary policy. But what could shift the Reserve Bank’s thinking is the fact that its 2014 GDP forecast (2.8 percent) may hold downside risk,” Schoeman said.

Kamilla Kaplan, an economist at Investec, said constraints on both the demand and supply side suggested a moderate economic climate would prevail this year.

“The growth momentum in domestic demand is weakening and, therefore, GDP growth will moderate, given that household consumption demand comprises two-thirds of GDP. Consumer confidence continues to signal pessimism and credit growth is slowing. In such an environment, administrative price hikes and escalating costs of essential items have a recessionary impact on disposable incomes,” she said.

David Faulkner, an HSCB economist, said: “Despite the improvement in fourth-quarter growth… [the] economic outlook remains weak as structural constraints to growth – labour unrest, weak confidence, higher rates and a challenging external environment – dampen growth prospects.” - Business Report


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