Good news often breeds optimism

PESSIMISM seems to shade all talk about economics these days. The rand has fallen through the floor, inflation is stubborn, businesses are closing and then there is the inevitable event in the Pretoria heart hospital which will just smother the last rays of light for South Africa and its economy, if some foreign press are to be believed. But are things really that dire? Few people would dispute that the economic times are hard, but there are slivers of hope that break through now again, almost like the sun in an English summer.

This week, the Kagiso purchasing managers’s index showed that expansion in the manufacturing sector picked up slightly in June. Although the index is still in the low 50s it has, for the last three months, been over 50, which indicates expansion in the sector.

Manufacturing production data published by Stats SA last month also showed some positive

Few people would dispute that economic times are hard

signs. The data showed manufacturing output rose by 7% year on year in April. Although economists said this was partly due to seasonal factors, like the Easter break falling mainly in March this year and the return to production of a large steel foundry, good news often breeds more optimism, which can never be a bad thing for a nation of pessimists.

Another index which showed some reason to celebrate was the Bank serve-Africa Economic Transaction Index, which is compiled by Economists.co.za’s Mike Schüssler. The index, which is shortened as Beti, (a name which reminds me of my great-grandmother who always had a friendly word of encouragement and some tea ready) showed year-onyear growth of 2.9% in May.

This points to growth in economic activity and possible stronger growth in the second quarter than the 0.9% Stats SA published for the first quarter.

One can even look for good news in the South African Chamber of Commerce’s latest business confidence index. Although the index declined from 90.4 to 90.2 in June, the same level as in March, the chamber said the index seemed to be “stabilising at lower levels”.

Neren Rau, CEO of the chamber, said the effort by the government, mining sector and unions to engage is positive progress. The fact that Trade and Industry minister Rob Davies published new guidelines for local governments to cut red tape, which will support SME growth, is another step in the right direction, Rau said.

However, it would be shortsighted to just ignore the negatives.

Lesiba Mothatha, head of market and economic research at Investment Solutions, said there were very few “growth leaders” in the economy. One problem was that two-thirds of the economy is driven by households and their spending, and households are not happy.

Year-on-year growth in retail sales slowed to 1.9% in April; growth in credit extension to households is stalling (and many households which borrow money land in trouble with repayments), unemployment is increasing, and the petrol price shot past R13 a litre this week.

From a macro view, the expected slowdown in quantitative easing is slowing the inflow of easy money to South Africa and the prices of our mining output are low. The Reserve Bank has hinted that it will cut its dismal 2.4% growth forecast for the year even further.

It is tiring merely to think of all the bad news.

Maybe it does sometimes help to look for the good news among all the pessimism. And if the economic numbers fail to pick up your mood about South Africa, there is always Daryl Impey.