The gain was the result of a sharp upsurge in manufacturing, coming out of a long recession which had been exacerbated by the strong rand.

Agriculture also began to recover from a lengthy drought, which had seen the sector shrink 9.5% in the previous quarter.

The growth marks a turnaround from the 1.3% registered at the end of 2003.

The figures were in line with expectations, but economists said they were encouraging enough to suggest South Africa could sustain 3% growth for the year as a whole.

The news will please the government of President Thabo Mbeki, recently re-elected despite concerns among many South Africans that they are still not benefiting economically from 10 years of majority rule.

Mixed picture

But despite the improvement in manufacturing and agriculture, other sectors showed little acceleration from the previous year.

Some - such as the utility industry and retailing - actually slowed down.

That, said Absa economist John Loos, should be enough to warn the Reserve Bank from raising interest rates too soon.

"(The) other statistics paint a more modest picture, and suggest that an overheating economy is still some way off," he said.

Still, the soaring cost of oil is likely to help light a fire under prices which are already heading upward, a development that could force the Bank's hand.