SA: Slowdown clouds economic hopes

2 September, 2007 in South Africa

source: News24
02/09/2007 13:37  – (SA)

Johannesburg – A string of gloomy data has clouded some of the optimism surrounding the South African economy, raising fears of another interest rate hike and casting doubt on government growth forecasts.

After the release of figures on Tuesday that growth had slowed by 0.2 percentage points to 4.5% in the second quarter of 2007, the main monthly inflation rate hit a new four-year high of 6.5% on Wednesday.

Figures published on Friday then revealed that the annual trade deficit rose to R9.4bn, in a trend blamed partly on the rising cost of imports of metals and machinery.

The inflation figure served to reinforce speculation that another interest rate rise was on the cards, which raised questions about Finance Minister Trevor Manuel’s budget forecast in February of growth rates of more than five percent until the end of the decade.

“On face value, the data suggests that the (Central) Bank should hike its key repo rate by half a percentage point to 10.5% at its next policy meeting in October after lifting lending prices by a cumulative three percentage points since June last year,” said an editorial in Business Day.

“The danger is that further interest rate increases will stunt the [continue reading]