Mine strikes deal blow to confidence

Vuyani Ndaba

CONFIDENCE in South Africa’s economy had fallen in the last month, a Reuters poll showed yesterday, as spillover from the worst mining strikes since apartheid hit growth forecasts for the next two years.

The Reuters Econometer, a confidence gauge based on six weighted indicators that looks two years ahead, fell to 259.66 in October from 263.26 in September.

Three months of labour unrest in the mining industry has hit the country’s platinum and gold output, undermined growth in Africa’s biggest economy and triggered two ratings downgrades.

The median forecast for gross domestic product growth (GDP) for this year remained constant at 2.5 percent, with the most bearish economist predicting 2.2 percent.

The Treasury cut its 2012 growth forecast to 2.5 percent in October from 2.7 percent, reflecting infrastructure bottlenecks and the impact of the platinum and gold strikes.

In the survey of 19 economists, the average growth projection for next year dropped to 2.9 percent from 3 percent and in the following year it edged down to 3.5 percent from a previous forecast of 3.7 percent.

“GDP growth for especially 2013 was revised down as exports and private sector fixed investment is set to be weighed down by lingering impact of the current industrial strife,” said Hugo Pienaar, an economist at the Bureau for Economic Research.

Inflation is likely to average 5.59 percent this year from a previous 5.51 percent forecast.

Consumer inflation surprised on the upside in September, accelerating to 5.5 percent year on year from 5 percent in August as food and housing costs increased more than anticipated.

Changes in weightings of the consumer price index basket that come into effect next year may also lift the headline inflation rate, with weighting of electricity and other fuels increasing.

The survey showed that economists’ interest rate expectations remained unchanged, with the Reserve Bank’s repo rate seen at 5 percent this year and next year and 6 percent at the end of 2014. – Reuters