The Gauteng Business Barometer (GBB) slipped by 6,2% in December to 145 index points from 154 index points in November. The index is also 4,8% lower than in December 2005, when it stood at 152 index points.
The GBB is a unique provincial index that measures business activity in various economic sectors in Gauteng. It was developed through a partnership between the Gauteng Business newspaper, Standard Bank and economist Mike Schüssler. It measures actual business activity in the province and informs business owners of changing economic trends.
The Gauteng economic environment faces its toughest economic times since 2003, with higher interest rates and inflation placing great pressure on businesses, Standard Bank said in a statement on Wednesday.
Schüssler says the GBB for December clearly shows that it has become difficult to do business in the province. The economic stress index, a sub-index of the GBB that measures negative economic factors, is at its highest level since 2003.
“It is driven up by higher inflation and interest rates, as well as an increase in civil debt judgements and a downswing in the creation of new jobs,” Schüssler said.
He added that although he expects more interest rate increases of between 25 and 50 basis points over the next few months, the negative impact on the economy may be at its peak.
Standard Bank chief economist, Goolam Ballim, said even though the GBB slipped in December, he expects continued economic growth in 2007 for South Africa’s economic hub.
“The effects of higher inflation and a slowdown in the growth of property values on consumer spending is becoming more evident. Investment in infrastructure and the weaker rand will benefit the supply side of the economy and the growth drivers of the economy will therefore shift from consumers to producers,” he said.
Ballim added that South African businesses will continue to cope with a volatile currency, which is at the mercy of domestic and international events.
“I expect the rand to average at around R7,35 and R9,53 against the dollar and euro, respectively, in 2007.”
He expects a stable year for interest rates which may even start to decline at the end of the year.
Ballim and Schüssler agree that 2007 will be a positive year for Gauteng’s economy, although the economic growth rate will be slower than achieved in the past few years. – I-Net Bridge