South Africa's economy grew at a faster pace in the second quarter of 2005, spurred by a turnaround in the key manufacturing sector and dampening speculation that interest rates may fall further this year, Reuters reported . The pickup in growth to 4.8 percent on a seasonally adjusted and annualised basis will be welcomed by the government, which sees the trend as key to attracting more foreign investment and cutting a jobless rate of more than 26 percent. But the improvement -- announced on Tuesday by Statistics South Africa -- could also signal that a prolonged cycle of interest rate cuts by the central bank is nearing its end, which will not please the country's vocal trade unions. The central bank kept its key repo rate unchanged at 7.0 percent at its last policy meeting on August 11. "It now really looks like the economy is going places ... at this rate we'll probably be growing the economy for the year at about 4.2 percent, which is good news," said Brait economist Colen Garrow. "It does mean it extinguishes any hope of getting another interest rate cut. But we're moving to (growth) levels where foreign direct investment and longer-term investors will be getting more excited about South Africa." Growth in the continent's biggest economy has gathered momentum in the past couple of years, driven mainly by a consumer spending boom ignited by the lowest interest rates since 1984. But with an expansion rate of 3.7 percent in 2004, up from 2.8 percent the previous year, South African growth still tends to lag other emerging markets -- which deters foreign investors. The growth rate of 4.8 percent in the second quarter of 2005 compared with 3.5 percent in the first quarter, and exceeded consensus forecasts for an increase of 4.4 percent, according to a Reuters poll of 18 economists. On an unadjusted basis, the economy grew by 4.5 percent compared with 4.2 percent in the first quarter, the data showed -- also above forecasts for a 4.4 percent increase. The rand did not move on the data, which is seen as less market sensitive than inflation figures for July, due on Wednesday and Thursday. --mor 1520 Local Time 1220 GMT
