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Bloemfontein – In April the Free State barometer's overall index moved into the red for the first time since August 2010.
The index is 2.7% down on the previous year and 6.5% down on the previous three months.
The agriculture, construction and mining sectors are hurting the most, and even sectors such as transport, which has always been a mainstay of the Free State economy, are starting to slip back.
This is the worrying picture sketched by the Sake24 and BoE Clients Free State Barometer. Each month it measures the pulse of the local economy using the most recent data.
"The Free State economy is growing more slowly than we expected, and we see the slowdown across a broad front," said economist Mike Schüssler, who compiles the barometer.
In April only three indices rose year-on-year (y/y): manufacturing (3.4%), transport (7.7%) and trade (6.1%). The biggest decline was in the construction index, which was 11.9% down on the previous year, followed by mining (10.5% down).
The 7.9% decline in the Free State agricultural index can be attributed mainly to weaker activity in its red meat industry. The beef index was 41.1% down on the previous year.
Fewer cattle were slaughtered in the first two months of the year but, because of a scarcity of pasture, more were slaughtered from March, said Free State University agricultural economist Professor Johan Willemse.
Willemse points out that estimates for the maize crop have also been periodically reduced in recent months, and that the lower agricultural index can therefore be partly ascribed to a smaller than expected maize crop this year.
The transport index is indeed 7.7% up on the previous year, but this is the smallest increase recorded in eight months. Overland transport rose 10.8%, the smallest increase in five months. The number of passengers moving through the Bloemfontein airport went up only 1.4% in April.
The broad trade index includes retail, wholesale, tourism and entertainment. Retail activity in the province increased 5% y/y in April.
Vehicle sales were 4.1% up after having shown double-digit growth only months before.
Wholesale sales, which include sales of coal for use in power stations, increased 10.7%.
"The April trade figures don't look all that bad, but they are far from the highs reached a few months previously," said Schüssler.
Government also cut back considerably on expenditure in the province. The government index fell 1.1% y/y. This was the first time since April 2008 that the index did not rise y/y.
Since government makes a considerable contribution to the province's economy, local enterprises suffer when government turns off the taps.
"The provincial government continues to appoint suppliers from outside the province, as in the recent case of the new legislature building," said Nancy de Sousa, president of the Bloemfontein/Mangaung Chamber of Commerce and Industry.
She said the chamber is still receiving complaints from businesses being paid late for work done for government, and which consequently experience cash flow problems.
Schüssler said it is still too soon to speak of a recession and within one, two, or three months an improvement could be seen if the international oil price keeps falling and a weaker rand helps exporters to become more competitive in the global market.
"But we have to remember that there is less demand from our biggest export market, the European Union, because of the debt crisis and this has a negative impact on our economy."
- Sake24
The index is 2.7% down on the previous year and 6.5% down on the previous three months.
The agriculture, construction and mining sectors are hurting the most, and even sectors such as transport, which has always been a mainstay of the Free State economy, are starting to slip back.
This is the worrying picture sketched by the Sake24 and BoE Clients Free State Barometer. Each month it measures the pulse of the local economy using the most recent data.
"The Free State economy is growing more slowly than we expected, and we see the slowdown across a broad front," said economist Mike Schüssler, who compiles the barometer.
In April only three indices rose year-on-year (y/y): manufacturing (3.4%), transport (7.7%) and trade (6.1%). The biggest decline was in the construction index, which was 11.9% down on the previous year, followed by mining (10.5% down).
The 7.9% decline in the Free State agricultural index can be attributed mainly to weaker activity in its red meat industry. The beef index was 41.1% down on the previous year.
Fewer cattle were slaughtered in the first two months of the year but, because of a scarcity of pasture, more were slaughtered from March, said Free State University agricultural economist Professor Johan Willemse.
Willemse points out that estimates for the maize crop have also been periodically reduced in recent months, and that the lower agricultural index can therefore be partly ascribed to a smaller than expected maize crop this year.
The transport index is indeed 7.7% up on the previous year, but this is the smallest increase recorded in eight months. Overland transport rose 10.8%, the smallest increase in five months. The number of passengers moving through the Bloemfontein airport went up only 1.4% in April.
The broad trade index includes retail, wholesale, tourism and entertainment. Retail activity in the province increased 5% y/y in April.
Vehicle sales were 4.1% up after having shown double-digit growth only months before.
Wholesale sales, which include sales of coal for use in power stations, increased 10.7%.
"The April trade figures don't look all that bad, but they are far from the highs reached a few months previously," said Schüssler.
Government also cut back considerably on expenditure in the province. The government index fell 1.1% y/y. This was the first time since April 2008 that the index did not rise y/y.
Since government makes a considerable contribution to the province's economy, local enterprises suffer when government turns off the taps.
"The provincial government continues to appoint suppliers from outside the province, as in the recent case of the new legislature building," said Nancy de Sousa, president of the Bloemfontein/Mangaung Chamber of Commerce and Industry.
She said the chamber is still receiving complaints from businesses being paid late for work done for government, and which consequently experience cash flow problems.
Schüssler said it is still too soon to speak of a recession and within one, two, or three months an improvement could be seen if the international oil price keeps falling and a weaker rand helps exporters to become more competitive in the global market.
"But we have to remember that there is less demand from our biggest export market, the European Union, because of the debt crisis and this has a negative impact on our economy."
- 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.
