Value of building plans passed a canary in coal mine for the South African economy
Category: Economics and construction
Date: 24 April 2023
Date: 24 April 2023
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The value of building plans passed up to February 2023 should serve as a serious canary in the coal mine scenario for the South African economy, and for government and policy makers that there is massive trouble heading the South African economy's way. Perhaps even the South African Reserve Bank (SARB) should take note of this before their next MPC meeting.
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Construction an early indicator of economic problems loading
Construction has always been seen as a solid early indicator of future economic activity or the lack thereof. Numbers published by Statistics South Africa about the value of building plans passed is a serious concern. And we believe this is serious cause for concern, and it looks like the canary in the column scenario.
For thos unfamiliar with the canary in the coal mine, coal miners used to take canary's with them into coal mines, as canary's are far more sensitive to dangerous gasses than humans, if the canaries died coal miners knew there were dangerous gasses and they need to get out. Basically the canaries served as an early warning system, warning coal miners about the dangerous gasses they might be unaware of.
No if we take the latest building plans data published and the serious declines we are seeing in this, and use that as a our early warning system (or our canary in the coal mine), there alarm bells should be ringing right now for all those interested in South Africa's economic prospects. Politicians, policy makers, businesses, economists should all be really worried right now.
For thos unfamiliar with the canary in the coal mine, coal miners used to take canary's with them into coal mines, as canary's are far more sensitive to dangerous gasses than humans, if the canaries died coal miners knew there were dangerous gasses and they need to get out. Basically the canaries served as an early warning system, warning coal miners about the dangerous gasses they might be unaware of.
No if we take the latest building plans data published and the serious declines we are seeing in this, and use that as a our early warning system (or our canary in the coal mine), there alarm bells should be ringing right now for all those interested in South Africa's economic prospects. Politicians, policy makers, businesses, economists should all be really worried right now.
The canary in the coal mine is dying
The following extract was obtained from the latest building plans approved publication from Statistics South Africa. "The real value of building plans passed (at constant 2019 prices) decreased by 21,1% (-R3 031,1 million) during January to February 2023 compared with January to February 2022. Decreases were reported for non-residential buildings (-30,2% or -R721,1 million), residential buildings (-26,9% or -R2 285,4 million) and additions and alterations (-0,7% or -R24,7 million)"
Now these declines reported are not insignificant. It shows a sharp decline in new building plans passed and approved and should be seen as the first indicator for a sharp downturn in SA's economic activity in months ahead. But we suspect the South African Reserve Bank will ignore signs such as this and inflict further pain on the South African consumers and economy by raising interest rates again, in order to try and curb inflation that is not even caused by consumers or factors that can be influenced by interest rate increases.
The canary in the coal mine that is South Africa's economy is dying and alarm bells about the health of the South African economy are ringing loudly and clearly. The question is whether anyone in any position of power is listening?
Now these declines reported are not insignificant. It shows a sharp decline in new building plans passed and approved and should be seen as the first indicator for a sharp downturn in SA's economic activity in months ahead. But we suspect the South African Reserve Bank will ignore signs such as this and inflict further pain on the South African consumers and economy by raising interest rates again, in order to try and curb inflation that is not even caused by consumers or factors that can be influenced by interest rate increases.
The canary in the coal mine that is South Africa's economy is dying and alarm bells about the health of the South African economy are ringing loudly and clearly. The question is whether anyone in any position of power is listening?