Third quarter production was held back by industrial action, which was especially felt in the mining and manufacturing sectors.

By contrast, growth in the tertiary sector remained robust. Domestic expenditure gained momentum in the third quarter and was up 4.2% quarter-on-quarter (q/q) at a seasonally adjusted annualised (saa) rate compared with 1.1% in the second quarter.

The growth in domestic expenditure was led by fixed capital investment with a 5.6% q/q saa gain from 5.0% in the second quarter and 4.8% in the first quarter. Household consumption expenditure continued to pace increases in income, so the 3.7% q/q saa rise in the third quarter in consumption was outpaced by the 3.9% jump in income resulting in moderate easing in the household debt to income ratio to 75.0% in the third quarter from 75.8% in the second quarter and a recent peak of 82.7% in the first quarter 2008.

Government consumption expenditure continued to be volatile as a result of the inclusion of a chunky arms purchase as part of consumption as mandated by the System of National Accounts. In the first quarter, government consumption surged by 9.3% q/q saa due to the purchase of arms and there was payback in the second quarter with a 0.3% q/q saa decline. In the third quarter there was a return to a more normal 4.7% increase.

As domestic production failed to keep up with domestic demand, the "excess" demand had to be met out of increased imports. The QB reported that the trade surplus shrank consistently in the first three quarters of 2011, as imports rose more strongly than exports, resulting in the trade surplus shrinking from a seasonally adjusted annualised rate of R61.6 billion in the fourth quarter 2010 to R34.9 billion in the first quarter, R26.8 billion in the second quarter and only R18.1 billion in the third quarter.

The deficit on the services, income and current transfer account widened "notably" to R132.7 billion in the third quarter from R110.4 billion in the second quarter and R110.6 billion in the first quarter.

The jump in the third quarter was due to "exceptionally" large dividend payments to non-resident investors.

The SARB said while it is quite normal for companies to declare sizeable dividends during periods of above-average economic growth, the magnitude of gross dividend allotments during the third quarter of 2011 was somewhat unexpected and contrary to the subdued domestic economic performance.

The SARB noted that the widespread moderation in economic activity, especially in Europe, adversely affected many export-driven economies. Nonetheless, South Africa's merchandise exports continued to grow due to firm demand from Asia and the rest of Africa.

The restocking of coal inventories by Chinese power utilities in anticipation of increased demand for energy during the winter months in the northern hemisphere contributed materially to the larger quantity of coal exported in the third quarter to Asia. This coal export surge continued into October when bulk exports shipped out of Richards Bay exceeded 8 million tons or annualised 96 million tons. 

SARB governor Gill Marcus said on November 15 that "we are certainly living in interesting but difficult times, because the possibility that things can go horribly wrong are very high".

She said a break-up of the Eurozone, which seemed previously to be unthinkable, is now being mentioned by some of the European leaders who had previously dismissed such speculation.

To address this issue European Union leaders are currently meeting in Brussels. She noted that the dramatic leadership changes in November in both Greece and Italy demonstrate just how urgent the need for concrete and credible action is.

"We do know that we are getting closer to the end game at what seems to be increasing speed, but we do not know when that will happen and what form it will take. This makes policy-making extremely complicated, as it is difficult, if not impossible, to meaningfully quantify the risks, and build them into policy decisions," she said.