South Africa’s economy grew by a lower-than-expected 2.6 percent in the third quarter of 2010, highlighting the fragility of its recovery and leaving the door open for another interest rate cut.

The data comes less than a week after the central bank painted a gloomy picture of the economy, saying the outlook remained subdued.

Bond yields fell after the data, with the 2015 bond hitting a session low of 7.02 percent, from 7.07 percent prior to the release.

The South African Reserve Bank cut interest rates by 50 basis points last week, adding to 600 basis points of cuts since December 2008, to help boost the economy.

Statistics South Africa said on Tuesday GDP expansion slowed from a revised seasonally adjusted and annualised growth of 2.8 percent in Q2, way below forecasts of a 3.2 percent rise in a Reuters poll.

The economy expanded by 2.6 percent year-on-year unadjusted, compared to a revised 3.1 percent in the second quarter of 2010, also below forecasts of 3.5 percent expansion.

“Overall, the number vindicates the Reserve Bank’s latest interest rate decision,” said Elna Moolman, economist at Renaissance BJM.

“We also maintain our view that as long as economic growth remains below potential, it keeps a possibility of further monetary easing alive, although it is not our base-line view that they will cut again,” she added. The central bank has put potential sustainable growth at 4.5 percent.

The statistics agency also tweaked its 2009 figures to reflect a contraction of 1.7 percent from a previous estimate of 1.8 percent contraction. The economy grew 3.6 percent in 2008.

South Africa exited its first recession since 1992 in the third quarter of 2009, but is still struggling to get back to full steam, with sluggish demand weighing on key sectors such as manufacturing.

The sector contracted 5.0 percent in the quarter versus the previous three months, with strikes a factor in the lacklustre performance, compared to a downwardly revised 5.0 percent expansion in the second quarter.

MANUFACTURING A WORRY

Manufacturing is the second biggest contributor to economic growth and is crucial for creating jobs in a country where more than a quarter of workers are unemployed.

In October the Treasury raised its 2010 GDP growth estimate to 3.0 percent from 2.3 percent, but said this was still not nearly high enough to lead to major cuts in unemployment, which stood at 25.3 percent in the third quarter.

“The figures are disappointing. They are below market expectations — but even more so that the previous quarter has been revised downwards. One did not expect that,” said Kabelo Masike, Treasury economist at Eskom.

“The pain of the manufacturing sector will once again refocus attention on the external value of the rand.”

The rand has gained over 26 percent against the dollar since the beginning of 2009, increasing calls for the government to take measures to weaken the currency.

The central bank has stepped up its foreign exchange accumulation, but it and the government have repeatedly said they do not target an exchange rate level.

Pretoria Portland Cement, southern Africa’s biggest cement maker, this month underscored the bleak outlook for construction in Africa’s top economy.

“We simply do not know what to make of the construction market, which is quite depressed,” chief executive Paul Stuiver told Reuters.

. The economy grew 3.6 percent in 2008

reuters reporting

Nigerian militants said on Tuesday they had attacked a pipeline feeding an oil refinery in the Niger Delta, underscoring the vulnerability of energy infrastructure despite recent military successes in the region.

The Movement for the Emancipation of the Niger Delta (MEND) said in a statement emailed to media that its fighters attacked the pipeline to the Warri refinery on Sunday. It said it would attack more pipelines in the coming days.

State-run oil firm NNPC has said it is repairing damage to the Warri-Escravos oil pipeline but made no further comment on Tuesday. The Warri refinery has a capacity of around 125,000 barrels per day (bpd).

“(These attacks) are a reminder to the Nigerian government of the futility of wasting the nation’s resources in combating militancy without addressing the underlying causes of agitation in the Niger Delta,” MEND said.

The authorities have claimed significant victories over MEND in recent days, freeing 19 hostages held by the group last Wednesday and then arresting the commander responsible and more than 60 of his followers.

The successes were a boost for President Goodluck Jonathan, who is the first head of state from the region and who brokered an amnesty there last year. A resurgence of violence could undermine his credibility ahead of elections next April.

The negotiations to release the hostages involved former MEND commanders who accepted last year’s amnesty.

Security experts said co-operation between the former militants and the armed forces was a significant new development which could help prevent MEND from rising to prominence again. But they also warned it was impossible to fully guard against attacks by small groups of gunmen on the industry.

EXPOSED PIPELINES, RIGS

Previous campaigns by MEND fighters have knocked out a significant chunk of Nigeria’s oil production, currently averaging around 2.2 million barrels per day (bpd), and cost it as much as $1 billion a month in lost revenues.

Oil infrastructure in the delta, a network of thousands of shallow creeks opening into the Gulf of Guinea, is extremely exposed, with thousands of kilometres (miles) of pipeline passing through remote and thickly forested terrain.

Disputes between local communities and oil firms are common, and attacking a pipeline and shutting down production requires little more than simple home-made explosives.

Shell declared force majeure on its Bonny Light oil exports on Friday after a pipeline was damaged, freeing it from shipment obligations, though there was no immediate evidence of links to militant activity.

It is also extremely difficult to protect offshore platforms such as those operated by Exxon Mobil and British-based Afren, from where 15 of the 19 hostages were kidnapped.

For such raids, the militants use open craft too small to be detected by radar. They are even able to operate far offshore by using a “mother ship”, a larger vessel which supplies the speedboats with fuel and food, security experts say.

reuters reporting