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Research Notes are more in-depth analyses undertaken by BER economists and consultants.
Brief note intended as a more regular interface with our clients.
The Impumelelo Economic Growth Lab is a unit at the BER, focussing on generating policy-relevant work and capacity building to achieve economic success in South Africa. This work is freely available to access on our website.
Business confidence increased further from 46 in the third quarter to 51 in the fourth quarter of 2014. Activity continued to recover. Closing the year on a stronger foundation is a good starting point for next year. In the absence of another turbulent year in the labour market and sustained Eskom load shedding, the economy looks good for growth of around 2.5% in 2015 - not a great outcome but nonetheless an improvement on this year. The moderation in manufacturing and retail selling prices also supports the BER’s forecast of PPI inflation slowing from 7.6% in the first quarter of 2014 to about 5.5% in the first quarter of 2015 and CPI inflation from 5.9% to about 5.1% over the same time period.
Read MoreNewly appointed Finance Minister Nhlanhla Nene faced a really tough test in his first Medium-Term Budget Policy Statement (MTBPS) yesterday. For starters, he had to deal with a significantly weaker macroeconomic backdrop than was projected at the time of the February Budget. Furthermore, the credit rating agencies and financial markets were looking for credible proposals to contain government spending in the face of very high civil servant salary demands and sustained high unemployment. In the event the minister certainly rose to the occasion.
Read MoreAlthough the end to the strikes will in itself lead to a big improvement in activity, the third quarter BER survey shows improvements in various other areas. However, the improvements are not widespread and modest. In most cases pre-strike levels of activity have not yet been matched. The rise in retail and wholesale confidence was much bigger than one would expect given underlying developments. The BER forecast provides for a recovery in consumer spending in the second half of the year. Until the surveys show more significant improvements in underlying developments – particularly the growth in the volume of food sales and employment – there is no need to revise this forecast upwards based on the survey results alone.
Read MoreThe hope of a possible start of the rebalancing of the economy in favour of the construction and manufacturing sectors, which was fuelled by trends in official data in the second half of 2013 and the buoyant fixed investment and export indicators in Q1, was dashed this quarter. Not only is the manufacturing sector clearly taking strain, with fixed investment and export indicators deteriorating, but the building sector results also signalled a halt of the expansion in non-residential building activity. The second quarter had a number of features that may have impacted negatively on general business conditions. These include the continuation of the strike in the platinum mining sector, industrial electricity users having to cut back on electricity usage as supply came under pressure, as well as the low level of trading days due to various public holidays. In all, the survey results imply that economic growth will remain weak during Q2.
Read MoreBusiness confidence declined slightly during 2014Q1 but saw a rebalancing in favour of the building and manufacturing as opposed to the trade sectors. Underlying survey indicators mostly supported this rebalancing of business confidence levels with activity in the non-trade sectors outperforming. The survey results provided evidence that manufacturing fixed investment – and in fact non-residential fixed investment in general – might be more buoyant than expected. Furthermore, the manufacturing export indicators signal a strong performance during Q1.
Read MoreAgainst the backdrop of a challenging macroeconomic environment, Finance Minister Pravin Gordhan presented a 2014 budget that should be relatively well received by SA consumers and the international ratings community. Starting with the consumer, there was no increase in the top marginal personal income tax rate as speculated in some quarters. However, the tax bracket adjustments did not fully compensate taxpayers for the impact of higher inflation. From a ratings agency perspective, the Budget presented accelerated fiscal consolidation over the next three fiscal years (the MTEF period) compared to October’s medium-term budget policy statement (MTBPS). The lower budget deficits are a function of a somewhat higher nominal GDP growth forecast that improved the revenue outlook. Importantly, the Treasury also made a further downward revision to the growth in non-interest government expenditure.
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