Year-end economic prospects gloomy
APPAREL and homeware retailer Mr Price released a buoyant trading update this week, anticipating a rise in core earnings of between 20% and 25%.
Coming off the back of a subdued year or so during which international rivals stole a march on it, it marked a return to the typical outperformance which made Mr Price a darling of the JSE.
But does it reflect an underlying change in the fortunes of the South African consumer?
Unlikely, because most signs still point towards a distressed population with further economic toil to come.
It’s apposite to ponder our economic outlook as Christmas approaches, bringing with it the trading bounty that retailers have traditionally anticipated.
No matter the circumstances, people seem to find the means to lavish upon their families and good selves all the financial goodwill the end-of-year period exacts.
Quite what Santa promises for 2017 is less clear.
Business Day reported yesterday that ratings agency Moody’s had made an unofficial visit to the country, preempting – by expert accounts – a credit downgrade in the coming weeks.
No waiting then for the outcome of the ANC elective conference in December, potentially a catalytic event insofar as our economic prospects are concerned.
While market watchers like to say that politics is less of a factor for investors than many deem, South Africa’s fate has become terminally entwined with a factional ANC and its president, Jacob Zuma.
The ratings agencies themselves – Fitch and S&P Global included – have blamed the volatile political landscape for deteriorating investor confidence.
Junk status is now almost an unanimous certainty, perilous for a nation groaning under spiralling debt.
Coupled with rising oil prices (petrol is slated for a steep hike in December), the consumer environment could be at its lowest ebb in years right before Christmas.
As much as the economy needs a good spurt of spending, the prudent approach demands caution.
So use that bonus wisely – if you’re lucky enough to get one.