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SA economy not out of the red yet

While the economy has avoided recession, economists warn there's little to celebrate.

While the economy has avoided recession, economists warn there's little to celebrate.

PRETORIA - Economists are suggesting that the poor performance of the economy could spell job losses and insecurity, unless major sectors turn the negative growth trend around.

Statistics South Africa says the country's GDP grew by 0.6 percent in the second quarter.

On an unadjusted year-on-year basis, the economy grew by 1 percent in the second quarter, compared with growth of 1.6 percent in the previous three months.

Analysts had expected year-on-year growth of 1.2 percent.

While the economy avoided a second consecutive quarterly contraction, economists are warning there's little to celebrate.

The mining sector, a major driver of the economy, experienced negative growth on the back of protracted strikes in the platinum sector.

ETM Analytics economist George Glynos says technically, South Africa has escaped recession, but practically, the economy remains weak.

"It doesn't speak to the kind of environment that will create jobs and job security for the majority of citizens."

Renaissance Capital Economist Thabi Leoka has expressed concern about the poor mining and manufacturing data.

"The two sectors that are supposed to be injecting a lot of capital and supporting growth are underperforming and this means it could shed jobs."

Leoka says this marginal growth means the economy is still struggling.

"We have escaped a recession but we are still not out of the red."

"We should remember the level of growth seen today is exceptionally low and totally insufficient to solve South Africa's deep developmental and jobs problems," Peter Attard Montalto, an emerging markets analyst at Nomura International, said in a note to clients.

Africa's most developed economy is struggling to right itself after waves of labour unrest this year hit corporate confidence, while rising food and fuel prices have squeezed consumers.

The mining and quarrying industry saw a 9.4 percent drop in quarter-on-quarter output, the data showed, after being hit by a five-month platinum strike this year.

Manufacturing, the economy's second-largest sector, fell by 2.1 percent from the previous three months, reflecting weak demand from struggling consumers.

Agriculture grew nearly 5 percent, while finance and real estate expanded by 1.5 percent, the data showed.