Exporter headwinds, bleak data buffet SA

Eurozone growth grinds to halt

ECONOMIC growth faltered in some of SA’s main export markets, data showed yesterday, raising concern that export volumes could fall and will not support economic growth as expected.

Production in sectors central to economic growth, such as manufacturing and mining, has been badly hit by strikes this year.

More disappointing — but not unexpected — data from Statistics SA yesterday showed that mining production fell 5.7% year on year in June mainly due to strikes at platinum mines until the end of that month.

A manufacturers’ survey yesterday showed that business conditions were bleak in the second quarter. Consumer spending — the main driver of economic activity since the 2009 recession — has slowed significantly and cannot be relied on to contribute meaning-

Our best bet is exports to Africa, which are already increasing

fully to economic growth.

Hopes for growth in SA’s economy were pinned on a hike in exports as global demand was expected to improve.

However, yesterday’s data showed that eurozone economic growth had ground to a halt in the second quarter as key economies such as Germany’s shrank and France’s stagnated.

This followed statements that gross domestic product (GDP) had fallen in Italy and Japan, Chinese lending had declined and US retail sales had stalled.

Stanlib chief economist Kevin Lings said that low economic growth in the eurozone coupled with moderating growth in China would have “enormous implications” for SA’s exports and economic growth.

The rest of Africa provided a sliver lining, though. “Our best bet is exports to Africa, which are already increasing due to the robust economic growth in other African countries. It is even possible that within a year exports to Africa could exceed our exports to Europe,” he said yesterday.

Global equity markets edged higher late yesterday after Russian President Vladimir Putin sounded a conciliatory note over the crisis in Ukraine, although bond yields in Europe fell to record lows on the news that the eurozone’s economic recovery had stalled in the second quarter.

South African bonds and the rand were supported after the dollar weakened on disappointing US jobless claims. Local bonds were stronger in afternoon trade while the rand was firmer at R10.54/$ in the late afternoon after closing at R10.57/$ on Wednesday.

The zero growth reported by statistics agency Eurostat was cause for alarm throughout the 18nation eurozone, which is bracing for the effect of sanctions imposed on and by Russia over Ukraine.

Germany, Europe’s largest economy, contracted 0.2% in the quarter, undercutting Bundesbank forecasts that GDP would be unchanged. France’s GDP failed to grow for the second consecutive quarter — it said it would miss its budget deficit target this year and cut its 2014 forecast for 1% growth in half.

The International Monetary Fund last month upgraded Germany’s economic growth forecast for this year to 1.9% from 1.7% but revised down France’s to 0.7% from 1% previously.

Pan African Investment and Research Services chief economist Iraj Abedian said yesterday that weak global demand and the local labour environment posed risks to South African manufacturing’s future performance.

The mining strike dented confidence levels of manufacturers in the second quarter, a survey by the Manufacturing Circle found. Employment in the sector will be muted, with 74% of producers surveyed indicating they would either keep current employment levels or shed jobs over the next year.

The Manufacturing Circle said “uncertainty” in the labour market, elevated wage and input costs, competition from imported goods, low labour productivity and low skills were among the sector’s main challenges. With Reuters