SA Officially in Recession

The information in this article is courtesy of The Times (SA hits first recession in 17 years – 27 May 2009).

South Africa has entered its first recession in 17 years. This comes after the economy decline by an annualised 6,4% in the first 3 months of 2009 – a result that was much worse than expected.

This announcement will back the case for another 100 basis point rate cut when the Monetary Committee meets on Thursday, 28 May.

It is expected that the economy is going to continue its downward spiral but not by much.

According to Joe de Beer, executive manager for national accounts at Statistics South Africa, the decline in economic activity is widespread across the economy with both the mining and manufacturing sectors posting the lowest quarter growth rates on record.

All signs point to a bigger rate cut with Jeff Gable, head of research at ABSA Capital and other analyst agreeing that the GDP data would likely tip the scale in favour of a full percentage point cut.

Central bank Governor Tito Mboweni is due to announce the rates decision from 13:00 on Thursday, when the monetary policy committee concludes a 2-day meeting.