Cape Town - In comparison with last year, things do not look too bad in the Western Cape economy, but there is a definite contraction in the short term.
The August Western Cape Sake24 and BoE Private Clients Barometer is 9% up on a year ago, but 1.7% and 3.2% down on July and May last year, said Mike Schüssler, the Economists.co.za economist who compiles the barometers.
“The fact that economic indicators are now turning negative certainly does not mean it’s the end of the world,” said Schüssler.
“We don't know how long this will last, but in the short term at least, the economy is in a contraction phase. That's why there needs to be a little more help from the authorities in terms of expenditure on things such as infrastructure.”
He said it was concerning that the Western Cape economy had contracted across a broader base – including the agricultural industry – in the past quarter.
On a three-year basis the Western Cape growth index has lifted only 2%. “The Western Cape is certainly not the worst off in South Africa, but the pressure is now becoming evident and jobs are unlikely to be created,” said Schüssler.
The agricultural index is 0.4% down on three months ago, 2% down on a month ago and 6% down on a year ago. The meat production index is 33% below that of three years ago and that for wheat production 22% down.
“But I won't concern myself over the Western Cape agricultural sector,” said Schüssler. “Wheat and other prices have started to rise and, as soon as the weather plays along, matters will improve. The weaker rand will also help wheat and wine farmers, for example.”
Western Cape construction is still under great pressure. The construction index is 8.5% down on May, 5.3% down on July and 10% down on August 2010.
“Most factories in the Western Cape are struggling and I'm concerned that food factories have not reached their potential, probably as a consequence of the previous droughts along southern Cape coastal areas,” said Schüssler.
A sector of the Western Cape manufacturing industry that does show a positive trend is furniture manufacture. Schüssler reckoned the Western Cape can also bank on its financial services sector, which continues to do well.
In his view the property industry has “had it”. The property index has been negative for five months year-on-year.
“I think the property market will continue to show slow growth for a long time.
“Prices first need to decline further before people will begin to buy, and I cannot see how the construction industry can improve before the property market has thoroughly turned around,” said Schüssler.
Visit www.fin24.com/barometer for a comprehensive breakdown of the barometers.