Reserve Bank: Mine strike hits GDP
First quarter GDP could have been closer to 1.6 percent if the strike had not taken place.
PRETORIA - South Africa's economy would have grown 1.6 percent in the first quarter of this year if the direct and indirect effects of a crippling five-month strike in the platinum sector are discounted, the South African Reserve Bank (Sarb) said on Wednesday.
"Annualised growth in real gross domestic product in the first quarter of 2014 could have been closer to 1.6 percent had industrial action not taken place, in contrast to the contraction of 0.6 percent which materialised," the central bank said in its latest quarterly assessment on the economy.
Q1 CURRENT ACCOUNT DEFICIT
The central bank also said the shortfall on South Africa's current account narrowed to its smallest in over two years in the first quarter of 2014 as lower dividend payments to offshore investors offset a deterioration in the trade balance.
The deficit was at 4.5 percent on GDP in the first three months of the year, the bank said, compared with a 5.1 percent gap in the fourth quarter and against market expectations for a 6.1 percent shortfall.
A smaller deficit on the services, income and current transfer account had "more than neutralised the deterioration in the trade balance, rent account of the balance of payments", the bank added.
In rand terms, the shortfall amounted to R161 billion, compared with R179 billion in the fourth quarter.
The trade balance was hit by an increase of 4.4 percent in imports, mainly driven by crude oil, while the five-month platinum strike was partly responsible for lacklustre growth of 2.1 percent in the volume of exports in the first quarter.
A weaker rand pushed the value of exports up 7.2 percent in the quarter, compared with just 1.8 percent in the last three months of 2013.
The softer currency also boosted portfolio flows, countering outflows seen at the start of the year when uncertainty around the United States Federal Reserve's tapering programme hit risky assets.
The rand hit a five-year low of 11.39 against the dollar earlier in the year, but has recouped some of those losses and traded at 10.84 on Wednesday.
FIRST QUARTER SPENDING GROWTH AT 2.7 PERCENT
Meanwhile, spending in South Africa expanded at an annualised 2.7 percent in the first quarter of the year after falling 3.6 percent in the last three months of 2013 as the pace at which inventories are being run down slowed.
However, household spending slowed, partly due to a rare contraction in spending on non-durable goods such as food and fuel.
Growth in real final consumption by households also moderated for the eighth time in nine quarters, growing at 1.8 percent from 2 percent in the fourth quarter, the bank said.
Consumers were hit by slower growth in disposable income, partly because of lost income from the platinum strike, and rising consumer prices.
The debt-service costs rose but households managed to incur debt at a marginally slower pace than the lacklustre growth of their incomes, keeping the ratio of debt to income at 74.5 percent in the first quarter, from a revised 74.6 percent in the last three months of 2013.
As a result of the five-month platinum strike, spending on non-durable goods such as food and fuel declined for the first time since the second quarter of 2009.
South African consumers also lost their appetite for durable goods as consumer confidence and credit extension moderated, but spending on recreational goods continued to increase at a firm pace, the bank said.
Higher spending on recreational and entertainment goods and medicine was more than neutralised by a contraction in consumer outlays on food, beverages and tobacco, and on fuel, with the price of petrol and diesel hitting new highs in the quarter.