Three horrible batches of economic data have come out just days ahead of the general election on Wednesday. At the end of last week the vehicle manufacturers’ association Naamsa announced a year-on-year slump in vehicle sales for April of 10.7% – slightly shrunken to 10% if you believe the front page headline in today’s Business Report. Today we saw the unemployment rate for the first quarter of this year jumping to 25.2 %, from 24.1 % in the final quarter of 2013. And the final blow came with the latest Kagiso Purchasing Managers’ Index – the PMI – which fell by 2.9 index points to 47.4 in April – the lowest level since July 2011. One the face of it, this trio of trouble suggests an economy which is floundering. But what do our experts make of it?
Ian Cruickshanks from the SA Institute of Race Relations:
There has been a succession of poor economic data, with today’s PMI and unemployment data, lower car sales numbers last week, and meanwhile there is slower growth in our partner trading countries. All this will have a negative impact on GDP growth, which is unlikely to be more than 2% in 2014. We have a ripple impact from the platinum mining strike, as those companies supplying goods and services to the platinum sector are slowing down, and in some cases closing down. Surely government should have noticed this, as revenue from the fiscus is also going to be constrained, affecting the ability to boost social grants and other benefits. It is surprising that the JSE All-Share Index is at an all-time high, despite the dismal economic data. This data will mean no growth in jobs of any significant extent this year.
Nedbank Economic Unit on unemployment data:
The unemployment rate is likely to remain high in the short term given weak domestic demand, rising input costs, labour disputes, significant infrastructure constraints and other regulatory issues in some of the key sectors. Today’s figures provide further evidence that local economic performance is still well below potential. However, we anticipate that the Reserve Bank will tighten policy gradually by a cumulative 50 basis points over the next few months as inflation rises above the target range.
Investec on the PMI:
Fundamentally, weak activity in the production side of the economy, coupled with the slowing momentum in household consumption demand will be reflected in equally soft GDP readings. A low interest rate environment remains appropriate against a backdrop of subdued economic climate. We continue to expect that the SARB will maintain its measured pace of monetary policy normalisation and only deliver one more interest rate hike this year of 50 basis points, in July.
The numbers are awful and reflect an economy which may not be in crisis, but which is limping along. The unemployment numbers were particularly shocking – indicating that more and more South Africans – and particularly young people- are struggling to find a meaningful role in the labour force. The millions of jobs promised by President Jacob Zuma have not materialised. However, his ANC supporters are unlikely to defect in sufficient numbers to oust him. The challenge for the next Zuma regime will be to create a more business-friendly environment, and we will be closely watching to seen what transpires.
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