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Johannesburg - In the first quarter of the year the Gauteng economy grew briskly at about 5.5%, as indicated by Sake24 and BoE Private Clients’ Gauteng Barometer.
Economists.co.za economist Mike Schüssler, who compiled the provincial barometers, said latest gross domestic product figures indicate the entire country’s economy grew 4.6% in the first quarter.
Although the official provincial figures are not available yet, according to the Gauteng barometer it appears that the province grew by 5.5%.
But he expects growth to slow down somewhat in the second quarter
In April the Gauteng barometer rose a healthy 5.4% to 96 index points compared with April 2009, emphasising the upward momentum of the province's economy since the beginning of this year.
Schüssler noted that the economy is doing fairly well, but he does not think the recovery effort will hold. He said it is clear that the revival will not have a clear V pattern, but will level off somewhat.
Certain industries, such as the residential construction industry and some subdivisions of the manufacturing sector (such as timber, furniture and textiles), are however still experiencing a great deal of pain. It is also clear that very few people who lost their jobs during the recession have found other work.
The biggest reason for the positive showing of the Gauteng barometer is the effect of government expenditure. In April this was a massive 20.2% more than in April last year. It is hoped that much of this expenditure, linked to the 2010 FIFA World Cup, will persist until the end of June.
On the negative side, the Gauteng construction industry is running out of steam.
Activity in the broad Gauteng construction sector was a massive 31.4% down on April last year, and also 17% less than in January.
Various World Cup projects have been completed and there is little action in the residential sector. This decline in activity also influences various other industries and has a negative effect on the economy.
Construction running out of steam
It is the residential construction industry, in particular, that is struggling with the floor space of new houses, which is 20% less than a year ago. Medium-sized houses (larger than 80m²) are not doing well and activity has declined 52% since April 2009. The number of townhouses is also 45% down after having fallen by 70% and 90% in the two preceding months.
This decline is not peculiar to Gauteng, but evident everywhere in the country. The construction industry was one of the few exceptions during the recession, but it is now quickly losing steam.
Gauteng’s significant financial, property and business services sector focuses heavily on the residential property market, and activity levels are still under pressure. In April these levels were 7.1% down on April last year, but significantly higher than in March and January, which indicates that things are improving.
The business services sector is beginning to pick up and the advertising industry has already reached a turning point, said Schüssler.
In April the Gauteng barometer’s stress index was 1.7% lower than that in April last year. This index measures all the negative elements in the Gauteng economy – such as unemployment and civil judgments for debt and interest rates - and is a good indication of how difficult it is to do business in the province. The decline means that pressure on Gauteng businesses is slowly but surely lifting, although conditions are still generally difficult.
- Sake24.com
For business news in Afrikaans, go to www.sake24.com.
