In Q1 2010, SA GDP rose by an encouraging 4.6%q/q, annualised (seasonally adjusted). This compares with an increase of 3.2%q/q in Q4 2009. SA’s Q1 2010 growth rate was above market expectations for a rise of 4.3%q/q (Bloomberg) (STANLIB +4.5%q/q). There was another wide range of forecasts from a high of +6.5%q/q to a low of +3.3%q/q. The low end forecasts are difficult to reconcile given the trends in the actual activity data released prior to the release of the GDP estimate.
The growth in Q1 2010 GDP was extremely broad-based, with all the major sectors of the economy recording positive growth. In particular, there was continued strong growth in the manufacturing sector, (up 8.4%q/q, annualised, contributing 1.3 percentage points to the quarterly GDP performance), while mining production improved sharply helped by a healthy pick-up in global trade (up 15.4%q/q, annualised, contributing 0.8 percentage points) and retail activity finally turned positive (up 3.3%q/q, annualised, contributing 0.4 percentage points) after lagging the recovery in the second half of 2009.
It is clear from the latest GDP data release that SA has convincingly exited the recession and is experiencing a broad-based economic recovery, with the World Soccer Cup still ahead. The World Cup is, obviously, expected to further enhance the recovery, especially in areas such as retail activity (clothing/beverages), accommodation, and transport.
A number of people have expressed concerns that economic activity could slump after the world cup, especially considering that a many investment projects, related to the world cup, will have stopped. There is little doubt that SA’s economic growth during 2010 will be ‘front-loaded’ in the sense that the growth rate for the first half of the year is likely to be stronger than the second half; that is the norm when hosting a large sporting event such as the world soccer cup. However, the fall-off in activity in the second half of 2010 is unlikely to be all that dramatic considering that world growth is still expected to be improving, SA inflation is expected to remain under control, SA interest rates are expected to remain unchanged as relatively low levels well in 2011, employment conditions are expected to continue to slowly improve, and a number of additional infrastructure related projects should commence.
For 2009 as a whole, SA GDP shrank by a real 1.8%, compared with growth of 3.7% in 2008. For 2010, we forecast GDP growth of around 3.1%, rising to 3.5% in 2011.
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