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KZN records slight downturn

Bloemfontein – April saw a slight downturn in the KwaZulu-Natal economy, with five sectors landing in the red, economic stress on the rise and the provincial inflation rate stubbornly above the national average.

The Sake24 and BoE Private Clients KwaZulu-Natal Barometer was only 0.3% up compared with the year before. In January the index had been 8.4% up year-on-year (y/y).

The sector showing the most significant drop was construction, which contracted 14.8% y/y. This was its biggest decline in 13 months and it seems that the slight rally at the end of last year was premature, said Mike Schüssler, the compiler of the barometer.

The poorer construction figures are also reflected in the province's financial, property and business services index, which fell 8.1% y/y.

The number of home loans approved over this period declined 0.5% as a downturn in the property sector became evident. Property transfers were 0.6% down and advertising sales 15.8% off.

"The weaker advertising sales are probably thanks to a perception that consumers are under pressure," said Schüssler.

Yet the KwaZulu-Natal barometer's trade index rose 7.4% in the period – the best performance of all the April indices.

Wholesale sales were 5.9% up y/y and retail sales improved 5.3%.

But retail growth was the worst since November last year and there are indeed indications that consumers are tightening their belts. Petrol sales rose only 1.2% after four price hikes in the first quarter of this year.

From the rise in the transport index (7.1% up), it appears that South Africa is still importing a lot of consumer goods and transporting them overland through the province.

The amount of freight handled in the Durban and Richards Bay harbours rose 0.9%. The weaker increase is owing to a smaller quantity of export products, but imports still stimulated growth.

The stress index, which measures how easy or difficult it is to do business in the province, rose 4.2% in the three months to April.

The province's inflation rate was 6.6% compared to the national rate of 6%.

Unemployment is starting to rise and in April the rate was 20.9%, compared to the previous month's 20.5%.

"The province's salvation is that it is not as dependent on mining as are the inland provinces, where factors like strikes negatively impacted those provincial economies."

In KwaZulu-Natal the decline in the coal price is, however, beginning to play a role and the mining index lifted only 1.2% y/y.

Schüssler said there is still no talk of a recession – it is simply a stage of weaker growth. "We will have to get used to the fact that below-average growth will be the norm for the next few months."

As part of its programme to improve rail and port infrastructure, Transnet has put aside R3.7bn for renovating outdated facilities at the Richards Bay harbour. The amount of freight handled at KwaZulu-Natal ports rose 0.9% y/y in April.

The sector showing the biggest decline is construction, which contracted 14.8% y/y.

 - 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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