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Johannesburg - The South African economy began to lose steam over the third quarter.
Its performance was significantly weaker than in the first half of the year. Business might have been much worse off if interest rates and inflation had not been close to record lows.
This was the view of Economists.co.za economist Mike Schüssler with the publication of Sake24 and BoE Private Clients’ provincial barometers for September. Schüssler compiles these indices for Sake24.
The indices are the only indicators reflecting the economic pulse of five of South Africa's provinces.
Schüssler said that although the provincial economies put up a relatively strong show in the first and second quarters, they had lost ground by the third quarter. South Africa was not yet on a knife edge, but a rise in interest rates could prove catastrophic, especially if the rand remained strong.
Analysis of the individual barometers shows that only the Free State economy performed worse (-0.7%) than it did a year ago.
The economies of Gauteng (5.3%), the Western Cape (5.6%), KwaZulu-Natal (7.2%) and the Eastern Cape (12.4%) all showed improvement over September last year, indicating how strongly these provinces had lifted after the recession.
But, said Schüssler, there was nevertheless an evident trend of these upticks losing steam in July, August and September. Without exception, economic performance had weakened month on month, as well as over three months. Gauteng and the Free State seemed to have bigger problems than the other provinces.
The Gauteng and Free State growth indices – measuring the overall increase in economic activity – turned negative in the third quarter.
The Western Cape growth index was unchanged, and that of the Eastern Cape slightly up.
This did not imply that we should expect a decline in national GDP during the quarter – merely that growth would slow down.
The barometers also showed that – despite great pressure on all economic sectors – the construction and manufacturing sectors had experienced particular hardship.
In recent years the construction industry benefited greatly from large projects for the World Cup soccer tournament, but every sector of the industry was now in decline.
In the Western Cape (-15%), Gauteng ( 9%), KZN (-28%) and the Free State (-26%) September activity levels were significantly lower than in September last year. The Eastern Cape, however, was 7.3% up.
Various large projects related to the World Cup soccer tournament were recently completed, but these had not been replaced by new ones, said Schüssler. The sector could therefore continue to perform poorly for some time.
The same applied to the manufacturing sector. Although activity levels were up on a year ago, in the third quarter they were down. The country's manufacturing as a whole showed a decline of about 0.2% in the three months to end-September, but in some provinces – such as the Eastern Cape and Gauteng (-0.9%) – the decline was worse. The Free State, where Sasol dominates the manufacturing industry, rose only 2.5%.
The economic upturn was certainly losing steam, and Schüssler anticipated that it would continue to tread water for some time. South Africa would not really be in trouble as long as inflation remained under control and interest rates did not rise. But if interest rates began to rise and the rand remained strong, problems might be expected, he said.
- 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.
Its performance was significantly weaker than in the first half of the year. Business might have been much worse off if interest rates and inflation had not been close to record lows.
This was the view of Economists.co.za economist Mike Schüssler with the publication of Sake24 and BoE Private Clients’ provincial barometers for September. Schüssler compiles these indices for Sake24.
The indices are the only indicators reflecting the economic pulse of five of South Africa's provinces.
Schüssler said that although the provincial economies put up a relatively strong show in the first and second quarters, they had lost ground by the third quarter. South Africa was not yet on a knife edge, but a rise in interest rates could prove catastrophic, especially if the rand remained strong.
Analysis of the individual barometers shows that only the Free State economy performed worse (-0.7%) than it did a year ago.
The economies of Gauteng (5.3%), the Western Cape (5.6%), KwaZulu-Natal (7.2%) and the Eastern Cape (12.4%) all showed improvement over September last year, indicating how strongly these provinces had lifted after the recession.
But, said Schüssler, there was nevertheless an evident trend of these upticks losing steam in July, August and September. Without exception, economic performance had weakened month on month, as well as over three months. Gauteng and the Free State seemed to have bigger problems than the other provinces.
The Gauteng and Free State growth indices – measuring the overall increase in economic activity – turned negative in the third quarter.
The Western Cape growth index was unchanged, and that of the Eastern Cape slightly up.
This did not imply that we should expect a decline in national GDP during the quarter – merely that growth would slow down.
The barometers also showed that – despite great pressure on all economic sectors – the construction and manufacturing sectors had experienced particular hardship.
In recent years the construction industry benefited greatly from large projects for the World Cup soccer tournament, but every sector of the industry was now in decline.
In the Western Cape (-15%), Gauteng ( 9%), KZN (-28%) and the Free State (-26%) September activity levels were significantly lower than in September last year. The Eastern Cape, however, was 7.3% up.
Various large projects related to the World Cup soccer tournament were recently completed, but these had not been replaced by new ones, said Schüssler. The sector could therefore continue to perform poorly for some time.
The same applied to the manufacturing sector. Although activity levels were up on a year ago, in the third quarter they were down. The country's manufacturing as a whole showed a decline of about 0.2% in the three months to end-September, but in some provinces – such as the Eastern Cape and Gauteng (-0.9%) – the decline was worse. The Free State, where Sasol dominates the manufacturing industry, rose only 2.5%.
The economic upturn was certainly losing steam, and Schüssler anticipated that it would continue to tread water for some time. South Africa would not really be in trouble as long as inflation remained under control and interest rates did not rise. But if interest rates began to rise and the rand remained strong, problems might be expected, he said.
- 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.
