Real Estate news - South Africa Falls Into First Recession in 17 Years
May 26 (Bloomberg) -- South Africas gross domestic product contracted in the first quarter, pushing Africas biggest economy into recession for the first time in 17 years as manufacturers and miners scaled back output and fired workers.
GDP fell an annualized 6.4 percent, the most since the third quarter of 1984, after declining 1.8 percent in the final quarter of 2008, Statistics South Africa said in a report released in Pretoria today. Economists surveyed by Bloomberg had forecast a 3.9 percent drop in output.
Its an extremely ugly number, said Nicky Weimar, an economist at Nedbank Group Ltd., South Africas fourth-largest bank. We all underestimated the extent of the decline.
The recession snaps more than a decade of economic growth, the longest period of expansion on record, putting pressure on newly installed President Jacob Zuma as he pledges to slash poverty and unemployment. Miners such as Anglo Platinum Ltd. and Lonmin Plc are firing thousands of workers, while manufacturers including Sappi Ltd. and ArcelorMittal South Africa Ltd. scale back production as exports slump.
The rand extended its decline after the release of the data, before gaining to 8.3625 as of 2:08 p.m. from 8.3643 before the data was released.
The government is unlikely to achieve its growth target of 1.2 percent for this year set in the budget, the Treasury said in a statement. Still, the contraction in the second quarter is expected to be smaller than the previous three months, it added.
The economy will probably rebound in the second half of the year, National Treasury Director-General Lesetja Kganyago told reporters in Pretoria today.
The drop in the first half will make it difficult for the government to meet its target of cutting the unemployment rate to 14 percent by 2014. The jobless rate, the highest of 62 countries tracked by Bloomberg, rose to 23.5 percent in the first quarter from 21.9 percent in the previous three months, according to the statistics office.
The implications are frightening for jobs, living standards and economic growth, the Congress of South African Trade Unions said in an e-mailed statement today. This is a massive national crisis which requires an immediate response from government, labor and business to defend our jobs and livelihoods.
The central bank has cut its benchmark interest rate four times since December, pushing it to 8.5 percent to spur consumer spending. It will lower the rate again by half a percentage point on May 28, according to 13 of 22 economists surveyed by Bloomberg.
The labor federation called on the Reserve Bank to cut the key rate by 2 percentage points.
Manufacturing, which accounts for 15 percent of the economy, fell a record 22.1 percent in the first quarter, after a 21.8 percent drop in the previous three months, the statistics office said. Mining contracted an annualized 32.8 percent, the biggest drop since records began in 1960, mainly because of a slump in platinum production.
The retail industry contracted for a fourth consecutive quarter, with output dropping an annualized 2.5 percent. The finance and real estate industry, which makes up a fifth of the economy, dropped an annualized 2.3 percent in the first quarter, compared with 3 percent growth in the previous three months.
An improvement in these industries is going to be a function of the global economy, Kganyago said. There are tentative signs of a recovery in the global economy and South Africa has underlying strengths, he added.
Construction, one of only three industries to expand last quarter, grew an annualized 9.4 percent, down from 10.8 percent growth in the previous three months. General government services and personal services, including health and education, also grew.
Article by: Nasreen Seria - www.bloomberg.com