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W Cape still reliant on consumer spend

Cape Town – Consumer expenditure is the major driver behind economic growth in the Western Cape, said Economists.co.za economist Mike Schüssler, based on the latest Sake24 and BoE Private Clients' Western Cape Barometer.

But sharply rising fuel and electricity prices and an increase in the number of summonses for debt are among the first signs that consumers are nearing the end of their purchasing power.

Civil debt summonses in January were 9% up on the year before, after having declined for several months. Figures for civil debt form part of the Western Cape barometer’s stress index, which rose 2% in January compared with the year before and was 0.3% up on December.

The index also reflects interest rates, inflation and unemployment figures and is an expression of the degree to which small business people and individuals in the province are experiencing financial pressure.

In the three months to January the stress index was 3% lower than in the previous three months.

Year-on-year (y/y) the barometer’s main index remains positive at 5%. On a three-month basis it is 9% up, and compared with three years ago 15.9% up.

Tourism growing

Schüssler pointed to the sustained good performance of the Western Cape tourism industry – as expressed in activity at hotels and restaurants – which has been growing for 26 successive months. This can also be seen in the number of passengers passing through the airports at Cape Town and George.

In January their numbers grew by 6.7%.

Although growth rates are low, the manufacturing industry in the province looks promising, with the manufacturing index having improved 2.7% y/y and on a three-month basis 2.9%.

The construction industry is still struggling, with the construction index 7.2% down on a year ago. Compared with three years previously the index is still 33.5% down.

In January timber sales were 14.4% lower than a year ago, although cement sales rose 9.6%. Fewer (7.9%) building plans were approved.

Western Cape minister of finance, economic development and tourism Alan Winde last week declared in his provincial budget speech that the province could grow 3.5% this year and 4% the next.

According to Winde, the provincial economy is exposed to international developments. Further deterioration in industrial countries' economies would have an impact on the Western Cape’s export activity.

Western Cape employment figures, according to Winde, had recovered to pre-recession levels. This is in contrast to the national figures, which were 3.8% down from the fourth-quarter high of 2008.

In the fourth quarter of last year unemployment in the Western Cape stood at 23%, which was still lower than the national figure, said Winde.

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