South Africa’s gross domestic product (GDP) growth should trend about 4% for the next few years as employment growth finally completes a virtuous circle.
In May last year, South Africa entered its longest “upward economic phase”, as the previous longest upward phase lasted from September 1961 to April 1965. The current upward phase started in September 1999.
The growth since the early 1990s has been based on restructuring that entailed high productivity growth as companies shed labour and boosted capital expenditures.
Job shedding ended in the second quarter of 2003, and in the third quarter of 2004 there had been a 3,7%, or 234 000, increase in formal-sector jobs over the prior 12 months.
This employment growth is fuelling a consumer spending boom, based on the decreased likelihood of being retrenched, which allows consumers to take on debt, as well as higher disposable income growth.
In the third quarter of this year, there was a 6% quarter-on-quarter (q/q) seasonally adjusted and annualised (saa) surge in gross national income after only a small 0,7% q/q saa rise in the second quarter.
Real final consumption expenditure by households rose to a 6,7% q/q saa increase in the third quarter, from a revised 6,3% (original 4,3%) increase in the second quarter and 6,1% in the first quarter.
Inventory accumulation eased to a R11,4-billion constant 2000 rand pace from R12,9-billion in the second quarter.
This was the 13th consecutive quarter of inventory accumulation. The ratio of industrial and commercial inventories to non-agricultural GDP eased slightly to 15,5% in the third quarter, from 15,6% in the second quarter of 2004, but was still below the 15,8% ratio in the fourth quarter of 2003.
The ratio bottomed at 14,1% in the first quarter of 1999. In the late 1980s, the ratio had been 19%.
The increase in GDP for the first three quarters in 2004 was 3,4% year-on-year and the range of forecasts for 2005 is from 3,5% to 5,7%, with the median at 4%. — I-Net Bridge