Gauteng Business News

Send  Share  RSS  Twitter  19 Feb 2010

FINANCE: The Recession Ends and a Slow Recovery Begins


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Leading economic indicators suggest that the domestic economy is now officially out of recession. And in line with forecasts for a steady recovery in the global economy, South African GDP is forecast to grow by 2,4% in 2010 and by 3,2% in 2011.

This is the view of Daryll Owen, Chief Investment Officer at BoE Private Clients, who says that despite a retreat in equity markets during January 2010, the economic data for calendar 2009 - most of which has now been published - suggests that the domestic economy has troughed and is very slowly on the mend.

This view is reinforced by the BoE Private Clients and Sake24 Provincial Barometers, which measure business activity in the private sector economies of four leading provinces: Gauteng, Western Cape, Eastern Cape and the Free State. The Barometers clearly indicate that the Eastern Cape and Gauteng moved out of recession during the last quarter of 2009.

Although the Free State and Western Cape remained in recession by virtue of poor showings by their respective agricultural sectors, there is a clear revival in manufacturing. This should lead a recovery in 2010.

“The manufacturing sectors in all provinces remain negative compared on an annualised basis. However, these sectors have recovered and show increased activity levels on a monthly and quarterly basis,” says Mike Schüssler, economist responsible for compiling the barometers.

“Gauteng - the first private sector economy to slide into recession - is now also leading the way to recovery. As we saw with the downturn, other provinces will follow Gauteng’s trend, even if there is a slight delay,” he notes.

One industry that remains under severe pressure in all provinces is the construction sector, while the national property sector remains in the doldrums.

Schüssler agrees that, while the worst may be behind us, the recovery will be slow. He anticipates a delayed recovery by the broad financial and business services sector, but believes that the economic growth rate in 2010 could surprise, and could even touch 3%.

Owen notes that equities have already discounted most of the anticipated recovery. “After the good run in 2009, we expect only moderate returns from listed shares for 2010,” he concludes.


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