SA set for economic recovery

Bloemfontein - All is set for economic recovery in 2011, but South Africans should not begin thinking the next growth phase has dawned.

This was the view of Economists.co.za economist Mike Schüssler, the compiler of the Sake24 and BoE Private Clients provincial barometers. These indices are compiled from many data series and measure the economic pulse of five of South Africa's provinces.

Schüssler said that provincial economies in the fourth quarter of last year wiped out much of the third quarter’s backlogs. That, together with positive factors like improved international commodity prices, gave him hope for the first quarter of this year.

It was the coastal provinces in particular that performed in December. The indices show that economic activity in the Eastern Cape was 9.9% up on a year ago. The December activity levels of the Western Cape (8%), Gauteng (5.3%), KwaZulu-Natal (4.8%) and the Free State (3.3%) were also considerably higher than in December 2009.

The coastal provinces, he said, had lower economic stress factors, lower inflation and less indebtedness than that to interior provinces.

In December all the provinces showed increases in their transport sub-indices, with the Eastern Cape (11.8%) performing best. The wheels of the economy were turning again. Road transport was increasing substantially, owing in particular to increased exports to the rest of Africa, said Schüssler.

He also forecasted better global resource prices and increased demand could not only strengthen the mining indices of Gauteng and the Free State, but would also ripple outwards to the transport sectors.

All five provinces' trade indices improved in December. This sub-index measures economic activity at both retailers and wholesalers, as well as leisure and tourism enterprises.

The South African consumer had become stronger over the year, but Schüssler did not believe that consumers would spend much more than they did currently. Levels of indebtedness were still too high.

A sector in which economic recovery was still filtering through slowly was manufacturing. Only the Eastern Cape index (7.5%) indicated a surge while the rest of the country's indices had all improved by less than 2.6% year on year.

The Free State (4%) still had the highest stress index of all the provinces – owing to high indebtedness and unemployment in the province. The lowest level of economic stress (-1%) was seen for the Western Cape.

Source: http://www.fin24.com