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In one of our blogs last week (9 June 2016) we took a look at the depressing story that household spending on transport sector related items is telling us about South Africa's economy. We went a step further and looked at the worrying trend in household purchases on durable goods.
In today's blog we take a look at supply/production side of goods manufactured in South Africa, whereas household spending showed the demand side, today we look at the supply side. |
The graphic above shows the three biggest decliners in terms of physical volumes produced in South Africa on a year on year basis. They are Household appliances (declining 17% from April 2015 to April 2016), Bodies for motor vehicles, trailers and semi-trailers, (declining 15.8% from April 2015 to April 2016) and Furniture (declining 10.3% from April 2015 to April 2016).
Again the top 3 decliners of volumes produced is in line with the strong decline in the spending on durable goods by households. As durable goods includes vehicles, household appliances and furniture. As consumer spending is one of the main drivers in our economy, and with their demand for expensive (durable goods) slumping, one has to wonder about the health of the South African economy. Past drivers of growth (manufacturing, mining etc is at extremely low levels. And the consumer is under pressure, government spending is being tightened to avoid a ratings downgrade. So the question is where is South Africa's economic growth going to come from? As in it's current state it is gonna keep stumbling along as it has been doing for years.
Again the top 3 decliners of volumes produced is in line with the strong decline in the spending on durable goods by households. As durable goods includes vehicles, household appliances and furniture. As consumer spending is one of the main drivers in our economy, and with their demand for expensive (durable goods) slumping, one has to wonder about the health of the South African economy. Past drivers of growth (manufacturing, mining etc is at extremely low levels. And the consumer is under pressure, government spending is being tightened to avoid a ratings downgrade. So the question is where is South Africa's economic growth going to come from? As in it's current state it is gonna keep stumbling along as it has been doing for years.
And if growth is not ignited, we will be downgraded to junk status, which would hurt our economy even more, and impede our path to economic growth and development even more. Which would take us even longer to recover from. Let's hope for some light at the end of South Africa's dark economic tunnel. Currently we do not see much of it.
Low to no savings, increasing debt levels, growing population, negative economic growth experienced in quarter 1 of 2016, rising interest rates, weak commodity prices, vulnerable currency, increasing unemployment. Our assessment of South Africa's economy. It is ill. Very very ill.
We predict that the South African Reserve Bank might be tempted to cut rates in order to provide some relief to consumers before the end of the year.