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Eastern Cape stress levels down

Cape Town – There’s good news and there’s bad news regarding economic growth in the Eastern Cape.

That is according to the Sake24 Barometer, which provides a view of  the economic status of the major provinces.

The Eastern Cape Barometer rose by 5.8% compared to last year and by 3.5% compared to the previous three months.

“Growth is slow, but the good news is that stress in the provincial economy is less,” said Mike Schüssler of economists.co.za, who compiles the barometers.

“The Eastern Cape had the second-best performance of all the provinces, largely thanks to the lower stress levels,” he said.

This may be ascribed mainly to interest rate drop, but the inflation rate in the province also shrank in quarterly terms. Unemployment increased by only 1.2% and the number of debt summonses was a substantial 46.3% lower.

“Lower stress is a good sign for consumers and buyers in the province,” said Schüssler. “It is essential, since retail sales in the Eastern Cape are under pressure, with a quarterly rise of only 1.3%.”

The second item of good news is that manufacturing has also improved.

This index increased year-on-year (y/y) by 5.6%, and by 1.9% compared to the previous three months. It is supported by a retail vehicle sales rise of 10.2%, with this sector boasting 32 months of continued growth.

“South Africans love cars,” said Schüssler. “We’ll keep on buying them even if it means we can only push them around.”

Fuel sales were negative for the third month in a row and the electricity usage index has also declined, which indicates that consumers are tightening their belts wherever possible.

However, it is not only vehicle sales that are looking good. “Manufacturing shows improvement throughout the province. It is probably the best of all the provincial indices.”

Now for the bad news: the transport and construction indices. “Growth has now turned negative,” said Schüssler. “It does not show a looming recession, but nevertheless an economy under pressure.”

The transport and communication indices rose by 8.7% y/y, but showed a decline of 8.2% compared to the previous three months. This means there were fewer people and less cargo at airports in the Eastern Cape, with minimal growth in land and sea freight.

“Exports have definitely slowed,” said Schüssler. “I think this is mostly due to slower growth in other African countries.”

The poor global economy and depressed world commodity prices are having a major effect on other African countries. “I think African growth has come to an end for now.”

And when African countries struggle they soon suspend imports of luxury goods, which come via and often from South Africa.

The construction index is erratic, said Schüssler. It grew by 16.5% y/y, but fell 17.1% in real terms compared to three months before, when the index achieved record growth.

“I thought there was too rapid growth then; I think it is normalising now.”

There is a last bit of good news: there is no mining in the Eastern Cape. It will spare the province the effect of the strikes other provinces are having to deal with at present, said Schüssler.

- 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.




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