Johannesburg - South Africa is within striking distance of achieving the treasury's forecast average growth of 5 percent over the next three years, with much of the impetus coming from the services sector.

Figures released by Statistics SA yesterday showed that economic activity in the first quarter of 2006 rose 4.2 percent - up from 3.2 percent in the previous quarter and in line with expectations of economists surveyed in a Reuters poll.

The figures show the economy is recovering from the temporary slowing in the fourth quarter of 2004, after growth that ranged between 4.1 percent and 6.5 percent in the seven preceding quarters.

The figures measure quarter-on-quarter growth that has been seasonally adjusted and annualised. And they reflect real growth in gross domestic product. In other words, the effect of inflation has been stripped out to reveal the extent of real value added to the economy in the period.

The biggest input in the first quarter came from the finance, property and business services sector. With a weight of 19.5 percent in the economy, it grew 8.8 percent in the quarter, contributing 1.7 percentage points to overall growth in gross domestic product.

According to Stats SA, growth in this sector was "mainly due to increased activities in the financial intermediation industry".

The most dramatic growth was achieved in the construction sector, which rose 13.7 percent. But it has a weight of 2.8 percent and therefore contributed only 0.4 of a percentage point to the whole.

Strong growth of 4.9 percent was registered in the transport, storage and communications sector (with a weight of 9.9 percent), which contributed 0.5 of a percentage point. The main contributor in this sector was the communication industry and land transport.

Activity relating to motor vehicles boosted activity in more than one sector. Motor vehicles, parts and accessories were major factors in the 4.3 percent growth in manufacturing (with a weight of 16.4 percent), as were petroleum, chemical products, rubber and plastic products.

These industries restored the manufacturing sector to growth after shrinkage of 0.3 percentage points in the previous quarter.

Motor vehicles made an impact on the sector that captured sales. Wholesale and retail trade, hotels and restaurants (with a weight of 13.8 percent), grew 5.1 percent due to "the wholesale and motor trade industries".

The category personal services (5.2 percent) rose 3.4 percent. The category included activities of membership organisations and recreational, cultural and sporting activities.

Electricity, gas and water (2.2 percent) rose 3.6 percent, "mainly due to an increase in the production of electricity".

The item government services (12.4 percent) was up 1.2 percent.

Shrinkage came in two sectors - mining and quarrying (6.3 percent) by 2.9 percent and agriculture, forestry and fishing (2.6 percent) by 6.9 percent.

Source: Business Report

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