Tight SA econ­omy shows up­ward trend

An­a­lysts cau­tiously op­ti­mistic as stats point to re­cov­ery

Weekend Argus (Saturday Edition) - - LIFE - BIANCA CAPAZORIO

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”.


JIN­GLE TILLS: The jury’s still out on whether con­sumers will splash out this Christ­mas.

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