South Africa's economy showed a further slowdown during its third quarter to 2,6% compared with downwards adjusted growth of 2,8% in the second quarter, mainly owing to a sharp contraction in government activity and manufacturing.

The third-quarter gross domestic product (GDP) growth was "worse than expected", said Econometrix director and chief economist Azar Jammine.

He noted that a strong contributor to the slower growth could have been the extended public sector strike that took place during the quarter.

Statistics South Africa (Stats SA) GDP manager Kedibone Mabaso said that general government services, which contribute to almost 14% of South Africa's GDP, dropped from 4,6% to 0,4% quarter-on-quarter.

Manufacturing showed a contraction of 5% during the third quarter, compared with growth of 5% in the previous quarter.

"The sharp drop in manufacturing can be associated with what has been happening in the rest of the world as the large build-up of inventories after the recession has now normalised," said Jammine.

Stats SA director-general Dr Rashad Cassim indicated that the strong rand could also have contributed to the contraction in the sector, seeing that the manufacturing sector was especially vulnerable to the global economy. He also pointed out that the reduction in manufacturing activity during the quarter spilled over to the electricity, gas and water sector, which further depressed GDP growth.

Meanwhile, the mining and quarrying sector proved to be one of the largest contributors to GDP growth in the third quarter, contributing 1,5 percentage points, based on a growth of 28,1%.

Cassim said that growth in the sector was led by an increase in the production of especially precious metals, such as platinum and gold, which was underpinned by the bullish prices received for these metals.

However, Jammine pointed out that the growth was off a very low base, as the previous two quarters of the year were plagued with strike action and safety-related stoppages in the mining sector.

The nominal value added to the economy by the mining and quarrying industry expanded by about R5-billion quarter-on-quarter to R62-billion.

Cassim said that a possible strengthening of GDP growth could be expected in the fourth and final quarter of 2010, if government activity returned to previous levels.

However, he emphasised that the newly released third-quarter growth figures, showed that the country was still far from government's objective of reaching a 7% growth rate.