PEBCI Rate of Recovery Slowing While
the PEBCI continues to reflect economic recovery the rate of growth in
the index appears to have begun slowing, a development that could well
correspond with developments in the broader economy.

While economic recovery internationally has been characterised by
growing demand and escalating commodity prices which in turn have
supported South Africa’s export performance and manufacturing sector,
which contributed significantly to a higher than expected level of GDP
growth in the fourth quarter of 2009, the economic stimulus provided to
the economy has yet to be as strongly reflected in the consumption side
of the economy. Key indicators of economic activity such as money
supply growth, growth in credit extension and growth in credit extended
to the private sector remain at historically low levels and the annual
change in real retail sales remained at -1.5 percent in February.
Households remain heavily in debt which together with significant job
losses during 2009 continues to negatively influence the willingness of
households to spend and to utilise credit with the focus remaining on
consolidating and reducing existing levels of debt. Strict bank lending
criteria, while easing, also continue to limit the recovery and the
rate of growth in credit extension to the private sector.

Looking ahead, however, real household disposable income reflected some
recovery during the fourth quarter of 2009, a trend which in all
probability will have continued into the first quarter of 2010, house
prices are growing slowly, the stock exchange has performed well, both
business and consumer confidence has reflected encouraging growth in
the first quarter and the Reserve Bank’s leading indictor of economic
activity has grown strongly, all of which auger well for accelerated
recovery in consumption demand in months to come and improved levels of
GDP growth.

PEBCI March 2010

With regard to the details of the PEBCI, thirteen components improved,
one reflected decline and one remained unchanged.

The indicators that supported the PEBCI through March included growth
in the trend cycle of new car sales in the metro which has bottomed out
and moved into a phase of recovery, as has the trend cycle in the total
new vehicle market in the country which is now also reflecting cyclical
growth. The trend cycle in the real value of exports, despite the
strength of the rand, is reflecting growth, as is the trend cycle in
the real value of imports. The trend cycles in the real value of
building plans passed in the Metro and in the value of buildings
completed are also reflecting improvement, and the trend cycle in
passengers arriving at the PE airport has reflected some
improvement.  Furthermore the PEBCI was supported by a decline
in the local rate of inflation to 5.3 percent in March, and trend cycle
growth in the real value of retail sales in the Eastern Cape which is
beginning to reflect slow recovery. A resumption of growth on the
underlying trend in the JSE all share index and in the rand US dollar
exchange rate also supported the PEBCI through March. Finally the PEBCI
further benefitted by strong growth in the level of consumer confidence
in the Eastern Cape during the first quarter of 2010 with the index
rising to 26, the highest level since June 2004.

The only indicators that reflected trend cycle decline through March
was the trend cycle of the price of gold which eased marginally.

The trend cycle in the real seasonally adjusted value of manufacturing
sales in the country after growing steadily for the past seven months
moved sideways in February.

Dr Neal Bruton of RGT
Smart Ltd
., compiled the PEBCI on behalf of

Source: PERCCI.

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