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State spend props up KZN economy

Bloemfontein – Increased government expenditure contributed to the KwaZulu-Natal economy not contracting in May.

The Sake24 and BoE Private Clients KwaZulu-Natal Barometer shows that the province's economy grew 3.3% year-on-year (y/y) in May, but on a quarterly basis the growth index was only 0.4% up.

The slowdown in the province's economic growth repeats the trend seen during the winter months last year as well. By the end of 2011 the tempo of recovery had begun to rise.

"This year KwaZulu-Natal will probably experience a similar turnaround, but the poor global economic prospects could aggravate matters," said Mike Schüssler, who compiles the KwaZulu-Natal barometer.

Expenditure by the national, provincial and municipal authorities contributes 14% to the provincial economy. Y/y government spending rose 7.8% after an increase of only 1.2% in March.

Schüssler said expenditure programmes seem to have resumed – to the benefit of the local economy.

In May consumers were the other prop of the provincial economy and the trade index showed strong 7.2% growth y/y. This includes a good 13% rise in vehicle sales, an improvement on the single-digit growth of recent months.

In May the province's transport and communications index performed best of all the sectors, with a rise of 10.1% compared with the year before and 40.3% three years before.

The big increase is attributable to the countrywide surge in communications activity.

The ports handled only 3.7% more freight.

"It seems that imports still play a big role, but exports are starting to decline," said Schüssler.

The province's manufacturing index lifted only 0.8% y/y, its poorest growth in eight months.

There is concern about the struggling financial, property and business services index, which fell 6.3% in May. The province's property sector is still battling to keep momentum and property transfers were 0.2% down on the year before.

It seems to be getting more difficult to do business in the province, with the economic stress index having risen for the second successive month.

"As consumer expenditure slows down, the KwaZulu-Natal economy will have to contend with a couple of serious challenges," Schüssler warned.

- Sake24

For more business news in Afrikaans, go to Sake24.com.

To find out how your province performed, click here.

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