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Cape Town - The level of new mortgage lending is likely to decline in the near term, according to John Loos, household and property sector strategist at FNB home loans.
He pointed out that the SA Reserve Bank (Sarb) leading indicator continues to point consistently to a very weak near term economic situation. The decline goes on, as it has done for over two years. The condition of the global economy featured strongly to the negative side, Loos pointed out, as the global economy came under increasing strain, especially in the emerging market nations.
The January 2016 Leading Business Cycle Indicator recorded the 28th consecutive month of year-on-year decline, still pointing to further economic weakness ahead, according to Loos. Year-on-year, the Sarb Leading Indicator declined by -4.0% in January 2016, a slightly more severe decline than the -3.8% year-on-year decline for December.
The rate of decline, on a year-on-year basis, is off its worst rate of decline of -5.8% in November 2015, but rather than suggesting a meaningful rate of improvement in near term economic growth, Loos said it is more likely to point to a slower pace of stagnation. On a month-on-month basis, the indicator declined by -0.6%, after zero % change in the prior month.
"The only possible positive is that the indicator’s year-on-year rate of decline is a little less severe than a few months prior," said Loos. "We are projecting real economic growth of 0.5% for 2016 as a whole, slower than a 2015 average growth rate of 1.3%."
Although export commodity prices, the manufacturing sector and the level of job advertisements were some key negative contributors, Loos said one of the most negative contributions came from residential building plans passed for flats, townhouses and houses larger than 80m² in January.
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On the list of positive contributors, on the other hand, was the rate of change in “new passenger vehicles sold". However, this was merely because of a slower rate of decline in passenger vehicle sales compared to December, and not because of any positive growth, Loos pointed out.
On the “neutral” list of contributors to the leading indicator change was the Business Confidence Index, whose level remained unchanged at a lowly 36 out of 100 in the first quarter 2016 survey.
Loos pointed out that confirmation of the stagnant economic situation can also be seen in the other two Sarb Composite Indicators, namely the Co-Incident Business Cycle Indicator and the Lagging Indicator.
From November’s -0.19% year-on-year decline the Co-Incident Indicator’s rate of decline accelerated slightly to -0.4% in December. The Lagging Indicator also saw its rate of decline accelerate from -1.54% in the previous month to –2.06% in December.
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