Economists were hopeful on Tuesday that the third quarter of the year would produce an even smaller contraction in gross domestic product (GDP) than the 3% quarter-on-quarter contraction recorded in the second quarter, while the final quarter would likely show a small positive growth number.

The 3% contraction in GDP was an improvement on the 6,4% quarter-on-quarter contraction recorded in the first quarter of the year, when South Africa entered its first recession in 17 years.

“This marks the third successive quarterly GDP contraction, the first in more than 15 years,” Investec economist Kgotso Radira commented in a statement.

The main contributing factor to the contraction was the manufacturing sector, which is the second-largest contributor to South Africa’s GDP, said Efficient Group economist Freddie Mitchell.

The manufacturing sector had recorded a 10,9% quarter-on-quarter contraction in the second quarter of the year, an improvement on the contraction of 22,1%, recorded in the first quarter of the year and the contraction of 21,8%, recorded in the fourth quarter of 2008.

Rand Merchant Bank chief economist Ettienne le Roux noted that the manufacturing sector was “firmly in a recession”, having recorded contractions since the third quarter of 2008.

He said that the global economy remained in recession, resulting in lower demand for South Africa’s exports, while domestic consumers also remained under pressure.

However, Mitchell said that there has been some economic recovery in Europe, most notably in France and Germany, as well as in the Far East markets, including Japan and China, which could help boost demand for South Africa’s exports.

Meanwhile, Le Roux said that the sharp decline in second-quarter agricultural output had been somewhat surprising.

Agricultural output had recorded a 17,1% contraction quarter-on-quarter in the second quarter, compared with a 2,9% contraction in the first quarter and 16,7% growth in the fourth quarter of 2008.

Further, he noted that monthly mining data had suggested a stronger rebound than the 5,5% growth for the mining and quarrying industry recorded in the second quarter of the year.

However, the 5,5% was a marked improvement on the first-quarter contraction of 32,8%.

On the other hand, the construction industry has continued with a consistent and strong performance, which Le Roux said reflected government’s infrastructural spend and the preparations that were being made for the 2010 FIFA World Cup.

The industry recorded a 12,2% quarter-on-quarter growth in GDP in the second quarter, compared with growth of 14,7% in the first quarter of the year and 10,8% growth in the fourth quarter of 2008.

Le Roux said that the GDP data should record a small positive quarter-on-quarter annualised number in the fourth quarter, which would hopefully be the start of more good news for the country.

Business Unity South Africa (Busa), meanwhile, said that although the rate of the negative growth in the economy has slowed, the global crisis continued to “bite deep”.

It warned that, despite there being “encouraging but tentative” signs that the global slowdown might have reached a turning point, the speed and extent of a recovery was still subject to a high degree of uncertainty.

It remained essential for South Africa to continue to pursue countercyclical policies and other agreed measures to soften the impact of the recession on growth, jobs and company liquidations, Busa stated.

Busa called for the timely implementation of appropriate policies, including another interest rate cut, to mitigate the impact of the recession.

“These policies are essential to rebuild business and consumer confidence and to lay the foundations for renewed growth and employment in 2010,” it added.

The South African Reserve Bank last week cut the repo rate by a further 50 basis points, to 7% - the lowest rate in four years.