Re­cov­ery light could al­ready be put out

Com­pos­ite lead­ing busi­ness cy­cle in­di­ca­tor

CityPress - - Business & Tenders - Justin Brown

There was a pos­i­tive sign for the lo­cal econ­omy this week amid the gloom, but this bright spark might al­ready have been put out.

The Re­serve Bank said that its lead­ing in­di­ca­tor rose for the sev­enth con­sec­u­tive month in Fe­bru­ary. How­ever, economists be­lieve this trend will soon be snuffed out by the Cabi­net reshuf­fle and the down­grade of the coun­try’s credit rat­ing to “junk” sta­tus.

A lead­ing in­di­ca­tor is a means to try and track changes be­fore the econ­omy clearly demon­strates a new trend.

Ned­bank econ­o­mist Isaac Mat­shego said that the gauge ap­peared to show a bet­ter-than-fore­cast re­cov­ery. How­ever, it was for the month of Fe­bru­ary, be­fore the reshuf­fle and the down­grades, he added. “The bright light is not go­ing to shine any brighter.”

Halen Bothma, a ETM An­a­lyt­ics econ­o­mist, said: “A sig­nif­i­cant rock has been thrown into the pool.” It would take months for the in­di­ca­tor to re­act to the down­grades and it could move down, Bothma added.

The first Re­serve Bank lead­ing in­di­ca­tor that would fac­tor in the April de­vel­op­ments will be re­leased in June. Since July last year, the gauge has climbed by 7%. Ned­bank and FNB both have to cut their growth fore­casts for 2017 to 0.7% due to re­cent events.

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