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GDP Slows Sharply in Q2| News by Staff Reporter
Prompting speculation of a rate cut and dashing hopes of a sustained recovery
Growth in the South African economy in the second quarter of this year showed a significant slowdown compared to growth in the first quarter, sparking speculation of an interest rate cut in the coming months.
According to Statistics SA (StatsSA) real gross domestic product (GDP) increased by 1,3% during the second quarter of this year.
“The seasonally adjusted real GDP at market prices for the second quarter of 2011 increased by an annualised rate of 1,3 per cent compared with an increase of 4,5 per cent (revised from an increase of 4,8 per cent) during the first quarter of 2011,” according to official StatsSA data released yesterday.
Economists had forecast growth in the economy of 1,6% in the second quarter of 2011.
StatsSA said contractions in the manufacturing, mining and agricultural industries – which account for almost 25% of economic output – were the main reasons for the slowdown in the second quarter of the year.
In addition to this, said StatsSA, the mining and manufacturing industries were the sectors in which the most jobs were shed in Q2. These figures threaten to undermine government’s ambitious plans to create 5 million jobs in the next ten years and reduce the country’s ever-increasing unemployment rate.
The result of a series of strikes in July across a number of industries, including the fuel and mining industries, is expected to be felt in the third quarter GDP figures, further dampening hopes of a sudden increase in economic activity.
Hopes of an interest rate cut, however, are being kept alive as factories and mines continue to show weak performance, but whether the central bank will make a further cut remains to be seen.