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Economic stresses slow down Free State

Bloemfontein - After the December holidays Free State consumers started to tighten their belts, but internet and cellphone use continued to rise.

These are some of the findings of the Sake24 and BoE Private Clients Free State Barometer for February.

Every month the Free State barometer measures the province's economic activity across a broad front and then compiles an index that shows which sectors of the economy are growing or lagging.

In February the overall index rose 3.7% compared with the year before. This is the smallest rise since October 2011, when the provincial barometer was still rising 13.1% year-on-year (y/y).

"It's certainly noticeable that the provincial economy is now growing more slowly and that economic stress is on the increase, but we are still in positive territory," said Economists.co.za director Mike Schüssler, the compiler of the Free State barometer.

More talk, travel

In February the transport and communications index performed the best (16.7% up on the previous year). The good rise can be partly attributed to overland transport, which rose 12.7%, but also to the greater use of communication devices like the internet and cellphones.

The communications portion of the index rose 22% compared with the previous year.

Other Free State indices that rose were those for government (9.5% up), financial, property and business services (6.6%), trade (5.6%) and manufacturing (3.5%).

Schüssler warned that consumers will have less disposable income this year and will not be able to continue stimulating the economy as they did last year.

"Consumers are becoming more careful and higher prices for everything – from fuel and toll roads to water and electricity – mean that they'll have still less money in their pockets."

February retail sales were 4% up on the previous year. Vehicle sales rose only 5% over the period. Although still positive, this is the weakest growth in 25 months.

One good sign is that the Free State index for financial, property and business services has continued to rise since November.

A total of 8.7% more home loans were approved than in the previous year and property transfers were 15.9% up. "This market is still recovering and is still far from its highs of four years ago," said Schüssler.

Asset management improved 2.9% over the year before, the number of hire purchase agreements rose 3.5% and advertising sales were 24.5% up.

The Free State barometer indicates that the local construction industry (32.1% down y/y) is still under pressure. Schüssler warned it is difficult at this stage to say whether the 7.2% rise over the past three months is merely a temporary flutter or the start of a recovery phase.

The agricultural index (10.2% down y/y) also began to improve in the past three months. Vegetable production recovered considerably but producer prices, especially beef, declined.

Consumers unfortunately are still seeing little proof of lower meat prices. According to Schüssler, there is still a considerable amount of meat in cold storage rooms being sold at high prices before the lower prices work their way through to consumers.

The February mining index was 6.9% down on a year ago. Because the Free State economy largely depends on its goldfields, this region is actually worse off than the rest of the province, said Schüssler.

"A Payprop survey found that goldfields rental property proceeds are the lowest in the country. This gives us an indication of how weak demand has become owing to the poor domestic economy," he said.

Weaker mining production also leads to a smaller demand for electricity, and the province's electricity index fell 4.7%.

The stress index was 1.8% up, mainly owing to inflationary pressures.

"No red lights are flashing for the Free State economy, but the barometer shows that growth is slow and that sectors under the cosh have not reached the point of recovery."

 - 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.

 
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