Gauteng’s economy remained under pressure in November although strong performances were reported in several sectors. The Gauteng business barometer (GBB) decreased by 2,7% to 142 index points, compared with November last year. However, it is 1% higher than the level of one month ago.
The GBB, which was developed by economist Mike Schüssler and Standard Bank, measures business activity levels in Gauteng.
November’s performance followed on a largely downward performance since the beginning of the year, suggesting a general slowdown in business activity.
The main culprit impacting on the index in November was the stress component of the index. This component is measured by the economic stress index and assesses the impact of negative aspects in the economy, such as interest rates and inflation.
In November this year, this index shot up by 5,1% when compared to November last year, while it was also 1,2% higher than the preceding month. This month’s index suggests it is currently difficult to do business in the province.
“Inflation remains a major concern as higher inflation will result in higher interest rates, hitting consumers’ pockets from two sides. They will not only have to pay more for products and services, but their monthly debt payments will also increase,” said Schüssler.
He added that this has already hit retailers and that the index shows a significant slowdown in this sector, particularly among vehicle and real estate traders.
Schüssler said he expects festive season sales to be similar to levels seen last year, although he foresees major declines in January and February next year.
Certain sectors such as the vehicle industry are already in recession and other, such as residential property and furniture, are slowing down as consumers try not to increase their debt burden.
“However, it is not all doom and gloom. Some retailers in the food and general consumer goods industries are stating that business is good,” said Schüssler.
Goolam Ballim, Standard Bank’s chief economist, said as 2007 draws to a close, it is clear that the economic environment is hardening.
“Consumer health is more fragile and retail entities are more challenged. Many businesses will experience celebratory festive season sales, although the growth rate will be lower than last year. This reflects a soft landing as consumers feel the pinch of fading real income growth, weakened debt affordability, and magnified food, energy and transportation costs,” Ballim said.
“Admittedly, this moderation must be seen in context. South Africa’s overall economy remains firm due to an exceptional fixed-investment drive, which will prevent a sharper general fall-off in the economy’s performance.” – I-Net Bridge