SA economy jumps back

Johannesburg - The economy could grow far more quickly this year than initially expected.

The Reserve Bank's leading indicator climbed 120.9 points in December compared with November's 120.

Year on year the index was up 13.9%.

The indicator is a pointer to what can be expected from the economy over the next six to 12 months.

According to economists.co.za economist Mike Schüssler, the indicator shows that the economy will definitely turn, and that the turn will be much faster than expected.

That is very good news, he says, but it is not to say that there will no longer be any problems in the economy. The PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) are experiencing problems that could affect SA as well, but for the next few quarters we can expect strong growth.

Schüssler looks to economic growth of 3% for 2010, although straggling sectors like construction will still experience strain.

Last week Treasury announced that it expected growth of 2.3% for the year and, according to Minister of Finance Pravin Gordhan, this is a conservative forecast.

But it is considerably better than the 1.5% growth that Treasury predicted in October last year in the medium-term budget framework.

According to John Loos, property analyst at First National Bank's home-loan division, the rise in the leading indicator also shows that the strengthening of the bond market for residential property remains on track.

This, reckons Schüssler, indicates that the economy is already much healthier.

He says that the economic cycle has turned enough for us to say the recession is over, and that we are now in a new growth cycle which will differ from the previous one.

"South Africa's economic growth has traction, but we still have to make our way through a lot of mud."

- Sake24.com

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