Tight SA economy shows upward trend
Analysts cautiously optimistic as stats point to recovery
WITH South Africa’s recession now technically over, economists say there were very few industries spared in the past year’s turmoil, and many will continue to struggle well into the next year.
A raft of positive economic data was issued this week indicating a technical end to the recession, but South Africans may need to keep their belts tightened as recovery is expected to be slow.
South Africa officially entered the recession after two quarters of negative growth earlier this year. Gross domestic product (GDP) sank to a low of -7.9 percent in the first quarter and by the second quarter had clawed its way back to just -2.9 percent.
Stats SA announced this week that South Africa had just nudged its way out of the recession with 0.9 percent growth.
For the first time in 31 months, the Consumer Price Index, also announced this week, has moved back within the 3-6 percent range set by the Reserve Bank, slipping in at 5.9 percent. Liquidations and insolvencies are showing a downward trend and vehicle exports nearly doubled in October from September, according to figures from the National Automobile Association of South Africa.
The recession claimed hundreds of thousands of jobs, with the Stats SA quarterly labour force survey indicating that 418 000 jobs had been shed from the second quarter to the third of this year.
Most of these were in the formal sector, with 150 000 lost in the manufacturing industry, 110 000 in the trade sector and 60 000 in construction.
This week’s positive data makes the outlook a little brighter, but economists suggest caution.
Standard Bank chief econo- mist Goolam Ballim said very few industries “were genuinely spared” from the recession, but that mining, agriculture and some retail firms relying on credit sales were “severely tarnished by the recession”.
Cash-strapped South Africans have been tightening their belts as consumer indebtedness surged.
But Ballim said that following the 2008 surge in inflation and the Reserve Bank’s lightening of interest rates, household finances were starting to stabilise, “sowing the seeds for a sustainable recovery”.
He said there were signs that the economy was starting to heal, and his outlook for next year was positive.
Ballim said South Africa’s external relations were “intimately tied” to the emerging markets, which were showing positive signs.
“The prognosis is fairly good,” he said
Neal Bruton of Response Group Trendline, which monitors the vehicle industry, said the recession was not really over.
He said the decline in demand for vehicles was still “bottoming out” and that any growth in demand would be slow.
According to Naamsa, industry employment levels had started to stabilise in the third quarter, after shedding over 7 000 jobs over the past year-and-a-half. In the third quarter, 57 855 cars were sold from 76 631 sold in the third quarter of 2008.
Property economist for FNB John Loos said while the property market was “pretty badly” hit, it had not “sunk back to the really dirty levels of 1999”.
And though prices may not have hit rock bottom, Loos said the number of estate agents leaving the industry over the past year was an indicator of the stress the industry suffered.
Loos said he would not rule out the possibility of a “W-shaped graph” where growth dipped a second time before climbing up again.
Loos believes the US and European economies might still have an impact on the South African situation, as stimulus packages in those countries that received them, have still not been withdrawn.
“In addition, we’ve still got a household sector which is very indebted and we’ve made no decent progress in reducing household debt,” he said.
While 2010 was likely to be better than 2009, Loos said the view of a sustainable and stable economy was “premature”.
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