Cape Town - Things look better in the Western Cape economy, at least compared to some of the other provinces forming part of the Sake24 and BoE Private Clients Barometer.
Economic growth is however largely being driven by consumer spending, according to Economists.co.za economist Mike Schüssler, who compiles the barometers.
Rising fuel and electricity prices, as well as anticipated increases in water prices, will nevertheless put serious pressure on consumer confidence, and consumers' ability to buy and growth will slow down, Schüssler warns.
In March the Western Cape barometer, which measures business activity in the province, was 1.3% up on a year ago at 114.5 index points. The growth index rose 4.1% to 126.7 index points.
An encouraging trend is that in March most of the province's economic sectors grew – both on an annual and a monthly basis.
The only exceptions year-on-year (y/y) were the electricity index, which fell 3% to 107.7 index points, and the construction index, which was 13% down on the previous year at 84.5 index points.
Schüssler reckons the decline in electricity consumption should not be regarded as a reflection of weaker economic activity, but rather as part of individual and factory efforts to save energy.
The construction index was 30.9% down on three years earlier, but on a monthly and three-monthly basis showed an improvement of 1.6% and 4% respectively.
Schüssler is unwilling to express an opinion on whether this is a sign of an eventual turnaround in the embattled construction industry, because house sales have not yet recovered significantly. The construction industry will again be able to show strong growth only when housing demand picks up, he believes.
In March the province's stress index was slightly higher at 2.8%. This is partly owing to rising inflation, but also to the steep 47% rise in summonses for debt, although the latter carry less weight in the index.
Schüssler believes what counts in the Western Cape's favour is that it is not experiencing the same problems as other provinces which have relied strongly on the struggling mining industry.
The Western Cape mining index constitutes only 0.3% of the whole barometer and mining activity consists mostly of quarries for building material, such as sand and gravel.
Western Cape factories don't look bad, and in March the manufacturing index rose 7% y/y. This is already 10% higher than three years ago.
The trade index lifted 8.1% helped by the entire wholesale sector, which rose 12.1%, and the retail sector, which was 7.7% up.
Motor sales in the Western Cape were 7.5% higher, and hotels and restaurants had 6.2% more visitors.
Wine sales rocket
March wine sales rose sharply. In March the Western Cape barometer's agricultural index was 4.3% up, compared with the previous year.
However, this is till 4.6% down on three years ago.
The big contributor to the index's growth in March was wine sales, which shot up 43%.
Meat sales were however 28.2% down. Schüssler attributes this largely to a decline in beef sales.
According to the industry, there was an oversupply of red meat in the market because of high prices, and dealers are now struggling to dispose of their stocks.
Wheat sales were 15.5% up, but fruit only 0.8%.
The fishing industry saw an 11.5% rise, based on the number of fishing boats leaving harbours.
The Western Cape tourism industry, Schüssler said, is also doing well, according to arrival figures at the Cape Town and George airports.
In March these were 6.2% up, and have been showing y/y growth for the past 28 successive months.
- Sake 24
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