GDP growth stopped slowing in mid 2013. The global recovery and weak rand are gradually revitalising exports. Leading indicators on new orders and growth are picking up, but unemployment and social unrest are eroding household confidence and consumption. Monetary and fiscal policies remain accommodating to avoid derailing a nascent recovery. Yet with balance of payment disequilibria undermining the rand, the central bank must be careful to curb core inflationary pressures, while the government strives to contain public debt.
A mild recovery in the works
The economic slowdown that began in mid 2011 finally seems to have ended. Growth rebounded strongly in Q2 2013, at an annualised rate of 3% q/q, after hitting a low of 0.9% in Q1. Strapped with structural problems, the mining sector made another negative contribution to growth for the third time in the last four quarters1. The manufacturing sector was the main growth engine in Q2, followed by services, notably financial services and commerce, which have increased continuously since mid 2009. Leading indicators on new orders and economic activity continued to pick up in July-August, returning to the highest levels since February 2012.
However, the conditions have yet to come together for a robust recovery. Net exports did not negatively contribute to GDP growth in Q2, but this was mainly thanks to a slowdown in imports (2.7% q/q in Q2 vs. 29.1% in Q1), in line with slowing domestic demand (up 2.7% vs. 3.5% in Q1). Household consumption rebounded timidly, up 2.5% in Q2 (vs. 2.3% in Q1), but is still holding near its lowest level since the 2009 recession. The same goes for investment. Meanwhile, companies continued to destock.
Household confidence, as measured by the FNB/BER index2, rebounded feebly to +1 in Q2, from -7 in Q1, before plunging again to -8 in Q3, the lowest score in 10 years. Employment contracted in Q2 2013 to its lowest level since Q3 2012 (unadjusted data in the formal, non-farm sector). A tight job market, higher gasoline and food prices, and the upturn in household debt will reduce the chances of a rebound in private consumption in H2. Retail sales declined 0.5% m/m in July. On a year-on-year basis, they rose only 2.8%, compared to 3% in H1 2013. This is already a sharp slowdown from the 5.8% increase reported in H1 2012.
BY Jean-Loïc GUIEZE
To Read the Entire Report Please Click on the pdf File Below.
A mild recovery in the works
The economic slowdown that began in mid 2011 finally seems to have ended. Growth rebounded strongly in Q2 2013, at an annualised rate of 3% q/q, after hitting a low of 0.9% in Q1. Strapped with structural problems, the mining sector made another negative contribution to growth for the third time in the last four quarters1. The manufacturing sector was the main growth engine in Q2, followed by services, notably financial services and commerce, which have increased continuously since mid 2009. Leading indicators on new orders and economic activity continued to pick up in July-August, returning to the highest levels since February 2012.
However, the conditions have yet to come together for a robust recovery. Net exports did not negatively contribute to GDP growth in Q2, but this was mainly thanks to a slowdown in imports (2.7% q/q in Q2 vs. 29.1% in Q1), in line with slowing domestic demand (up 2.7% vs. 3.5% in Q1). Household consumption rebounded timidly, up 2.5% in Q2 (vs. 2.3% in Q1), but is still holding near its lowest level since the 2009 recession. The same goes for investment. Meanwhile, companies continued to destock.
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Household confidence, as measured by the FNB/BER index2, rebounded feebly to +1 in Q2, from -7 in Q1, before plunging again to -8 in Q3, the lowest score in 10 years. Employment contracted in Q2 2013 to its lowest level since Q3 2012 (unadjusted data in the formal, non-farm sector). A tight job market, higher gasoline and food prices, and the upturn in household debt will reduce the chances of a rebound in private consumption in H2. Retail sales declined 0.5% m/m in July. On a year-on-year basis, they rose only 2.8%, compared to 3% in H1 2013. This is already a sharp slowdown from the 5.8% increase reported in H1 2012.
BY Jean-Loïc GUIEZE
To Read the Entire Report Please Click on the pdf File Below.
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