SA headed for stagnation

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Filomena Scalise

Johannesburg - South Africa avoided a technical recession, but sporadic economic growth was not enough to shake off economic stagnation, according to BankservAfrica's Economic Transaction Index (Beti) released on Wednesday.

The Beti showed the economy recovered a little in June 2014, but not enough to stop the economic decline, BankservAfrica corporate reputation head Michael Rubenstein said in a statement.

A technical recession is defined as two consecutive quarters of negative gross domestic product growth.

In June, the Beti dropped 0.5 percent compared to a year ago, and was less than the month before, despite stronger quarter-on-quarter growth of 1.4 percent.

“The fact that the strike in the platinum sector ended probably had very little influence on the Beti in June,” Rubenstein said.

“So we believe that the stronger monthly improvement must have come from sectors outside of manufacturing and mining.”

Mike Schüssler, chief economist at economists.co.za, found the timing of growth strange.

“The reason for the uptick may be that people who have held back on buying things or increasing inventories may just have been unable to delay purchases any longer,” Schüssler said.

“Or perhaps consumers were more relieved than expected by the short-lived decline in the price of fuel in the last two months.”

The other trend the Beti appeared to show was the month's weakest data followed the end of large industrial action.

With further strike action underway, it was likely the weakest Beti growth numbers could still lie ahead.

This was as actual working days lost in the first half of the year, due to industrial action, were estimated to be around nine million.

“It is important to note that a large piece of our headline number seems to have more to do with the poor, strike-laden performance in 2013 rather than with the robustness of the last few months,” Schüssler said.

“The current growth is not fast and it is also not certain. Therefore, the best we can say is that a technical recession was avoided.”

Rubenstein said while transactions were “strongly” up 9.7 percent in nominal terms before adjusting for inflation, in real terms they were lower than a year ago, having fallen by 7.5 percent.

The Beti indicated that second quarter growth would be between one and 1.5 percent, which meant gross domestic product growth for the year, up to the second quarter, was going to be around 1.3 percent. - Sapa


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