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Bloemfontein - The pace of economic growth seems to be easing and the
South African economy may have reached its highest growth for 2011.
This warning comes from data collected in May this year for the Sake24 and BoE Private Clients provincial barometers.
The provincial barometers measure the economic pulse of five provinces and their compiler, Economists.co.za economist Mike Schüssler, said the negative effects of the continuing uncertainty over the health of the global economy, nationalisation and labour legislation should not be discounted.
He said that we are already seeing a decline in demand for durable goods and property, despite having the lowest interest rates for decades. Talk of nationalisation make people wary about the future and put a damper on confidence.
The province that performed best in May was the Free State, whose overall index rose 12.9% year-on-year.
The Western and Eastern Cape (both 12.4% up), KwaZulu-Natal (11.9%) and Gauteng (8.2%) also showed significantly higher economic activity levels than a year ago. But it is clear that these levels are slowing down.
Where some provinces in the first quarter moved forward at a trot, for the past three months in sectors like manufacturing, trade and construction there has been a levelling off. Government expenditure is also starting to slow down from the record levels seen in March at the end of the financial year.
Schüssler said this economic levelling off does not mean the beginning of a downward phase. He said we have to be careful not to become too negative. Our economy experienced a good first quarter, and the second quarter will also be positive, although growth will be slower than before.
This is not necessarily a bad sign.
In certain circumstances, he said, it is necessary for growth to ease off. Government expenditure, for example, has been unsustainably high since the recession.
He believes a 3% growth rate will be possible for this year. Against the background of the current focus on job creation and sustainable economic activities, this is on the low side.
The provincial manufacturing indices are in fact showing that this potential job-creator is experiencing a levelling off.
In the Eastern Cape the manufacturing index has contracted 2.2% over the past three months, while in Gauteng it was up a mere 1.7%.
The countrywide transport sector is still seeing double-digit growth, however, with Gauteng 21.3% up on a year ago, showing the highest growth.
Schüssler pointed out that foreigners’ high demand for South African commodities is helping to keep the country’s wheels of industry turning.
Global factors like the aftermath of the European debt crisis and a slackening of Chinese manufacturing could, however, alter the picture later this year. At home, pressure on inflation could increase because of higher wage demands, unemployment and increasing consumer indebtedness, all factors which make it more difficult to do business.
If one takes all these factors into account, said Schüssler, it seems as if economic growth in the second half of the year will be less spectacular.
- Sake24
For business news in Afrikaans, go to Sake24.com.
For more news on the Sake24/BoE Private Clients barometers, go to www.fin24.com/barometer.
This warning comes from data collected in May this year for the Sake24 and BoE Private Clients provincial barometers.
The provincial barometers measure the economic pulse of five provinces and their compiler, Economists.co.za economist Mike Schüssler, said the negative effects of the continuing uncertainty over the health of the global economy, nationalisation and labour legislation should not be discounted.
He said that we are already seeing a decline in demand for durable goods and property, despite having the lowest interest rates for decades. Talk of nationalisation make people wary about the future and put a damper on confidence.
The province that performed best in May was the Free State, whose overall index rose 12.9% year-on-year.
The Western and Eastern Cape (both 12.4% up), KwaZulu-Natal (11.9%) and Gauteng (8.2%) also showed significantly higher economic activity levels than a year ago. But it is clear that these levels are slowing down.
Where some provinces in the first quarter moved forward at a trot, for the past three months in sectors like manufacturing, trade and construction there has been a levelling off. Government expenditure is also starting to slow down from the record levels seen in March at the end of the financial year.
Schüssler said this economic levelling off does not mean the beginning of a downward phase. He said we have to be careful not to become too negative. Our economy experienced a good first quarter, and the second quarter will also be positive, although growth will be slower than before.
This is not necessarily a bad sign.
In certain circumstances, he said, it is necessary for growth to ease off. Government expenditure, for example, has been unsustainably high since the recession.
He believes a 3% growth rate will be possible for this year. Against the background of the current focus on job creation and sustainable economic activities, this is on the low side.
The provincial manufacturing indices are in fact showing that this potential job-creator is experiencing a levelling off.
In the Eastern Cape the manufacturing index has contracted 2.2% over the past three months, while in Gauteng it was up a mere 1.7%.
The countrywide transport sector is still seeing double-digit growth, however, with Gauteng 21.3% up on a year ago, showing the highest growth.
Schüssler pointed out that foreigners’ high demand for South African commodities is helping to keep the country’s wheels of industry turning.
Global factors like the aftermath of the European debt crisis and a slackening of Chinese manufacturing could, however, alter the picture later this year. At home, pressure on inflation could increase because of higher wage demands, unemployment and increasing consumer indebtedness, all factors which make it more difficult to do business.
If one takes all these factors into account, said Schüssler, it seems as if economic growth in the second half of the year will be less spectacular.
- Sake24
For business news in Afrikaans, go to Sake24.com.
For more news on the Sake24/BoE Private Clients barometers, go to www.fin24.com/barometer.
