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GDP growth slows to 1.3% as manufacturing slumps

Power outages continue to curb production.

South Africa’s economy, the continent’s second-largest, grew at a slower pace in the first quarter as power outages curbed manufacturing output and farming output contracted.

Gross domestic product rose an annualised 1.3% from the previous quarter, when it expanded 4.1%, the statistics office said in a report released in Cape Town on Tuesday. The median estimate of 19 economists in a Bloomberg survey was 1.5%.

State-owned utility Eskom implemented 21 days of rolling blackouts in the first three months of the year as it struggled to meet demand for electricity. The power constraints have stifled factory production, limiting a recovery from the slowest growth last year since a recession in 2009. The purchasing managers’ index, an indicator of manufacturing activity, fell to the lowest level in 11 months in April.

“On the production side of the economy, output growth has been adversely affected by structural issues relating to electricity supply shortages,” Kamilla Kaplan, an economist at Investec in Johannesburg, said in an e-mailed note to clients before the data was released. “Another key contributor has been the weak external demand growth in world trade volumes.”

Manufacturing fell an annualised 2.4% in the first quarter and agricultural output contracted 16.6%, the statistics office said. Mining rose 10.2%, while financial services expanded 3.8%.

Slow expansion and a relatively low inflation rate have allowed the Reserve Bank to leave the benchmark repurchase rate unchanged at 5.75% since July last year. The central bank has cut its growth forecast for the year to 2.1% from 2.2%.

“The domestic growth outlook remains weak, amid continued electricity supply constraints and low and declining levels of business and consumer confidence,” Governor Lesetja Kganyago said on May 21.

A five-month work stoppage at platinum producers, followed by a strike at engineering companies cut 1 percentage point off economic growth in 2014, according to the central bank. The economy grew 1.5% last year.

©2015 Bloomberg News

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