The article below also simple resists the reality of higher fuel costs. When I say higher, I mean double or triple in the next months to 1 or two years. The writer is trying to play down slowing demand, and trying to encourage what we might call 'demand optimism'.
November and December will basically see the end of articles of this nature. I'd predict a hard landing, based on the fact that the market and its consumers aren't able to rationalise their behaviour based on reality.
Current Account: End of the upswing?
Oct 19 2005 07:27:24:273AM
By: Greta Steyn
IS SA's economic upswing coming to an end? One could be forgiven for thinking so, after the SA Chamber of Business (Sacob) made some alarmist comments this month.
Further fuelling a sense of gloom is the retail sales figure for July, which showed a sharp slowdown from earlier months.
Presenting its Business Confidence Index earlier this month, Sacob said: "There are strong indications that the exceedingly favourable demand side conditions are at serious risk of being corrected ... these advantageous conditions are peaking and cyclically heading for a downturn."
These comments came shortly after Statistics SA released figures showing year-on-year growth in retail sales in July slowed to only 3.2% from 5.8% in June.
Is a sense of alarm justified? Not at all. Don't be panicked by sheer senationalism.
Yes, SA is heading into a downswing. But it's important to remember that it simply means the rate of growth is slowing down. It doesn't mean that the economy is shrinking.
It also doesn't mean, as has been suggested in media reports, that the longest post-war expansion in SA's history is coming to an end.
The demand side of the economy, which has been red-hot, is cooling down and can be expected to continue to do so.
But that's only to be expected, as the stimulus from a 6.5 percentage point cut in interest rates falls away.
Also adding impetus to the slowdown is the higher fuel price, which eats into consumers' disposable incomes.
But all this has to be kept in perspective. Economists aren't expecting a major slowdown. As a matter of fact, they have been revising their growth forecasts for next year upwards.
In June, the Reuters poll showed economists on average forecast a gross domestic product (GDP) growth rate of 3.78% in 2006.
The latest poll shows this forecast has risen to 3.94%. Even as the oil price has hit new records and predictions of higher interest rates have materialised, economists have become more optimistic.
Factors such as expectations of major tax relief next year are fuelling their belief in the resilience of the SA economy.
Another point that needs to be borne in mind is that the retail sales figure for July may be understated. It may be yet another statistical error from Stats SA.
Nedcor points out in its comment on the numbers that the Retail Liason Committee, an industry body, said that growth in real retail sales accelerated to 9.6% in July from 4.6% in June.
This contrasts with the Stats SA figures. Even disregarding the possibility of error, bear in mind that one swallow doesn't make a summer. It doesn't do to make too much of one month's figures.
An encouraging sign is that the First National Bank/Bureau for Economic Research consumer confidence index remained at an impressively high 17 points in the third quarter, the same as in the second quarter. This is regarded as extremely high. The index peaked in the second quarter of 2004.
Also putting matters into perspective are vehicle sales for September, which remain red-hot. The annual rate of increase in new car sales was 25% in September - a very high level - but down from 28% in August.
Stanlib economist Kevin Lings points out that the September sales number of 36 472 was the highest monthly sales on record.
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