Indebted Gauteng residents still struggling

The latest provincial barometers show that economic recovery has been strongest in the economies of the Eastern Cape, the Free State and the Western Cape, with Gauteng lagging behind. The barometers are compiled by Economists.co.za economist Mike Schüssler from various time-series data to measure economic activity in the four provinces.

During February, the Gauteng barometer fell 0,9% year-on-year (y/y). By comparison, the Eastern Cape barometer rose by 7,2%, while the Free State rose by 3,4%. The Western Cape barometer also showed a y/y decline of 2,2%, but a month-on-month increase of 1,3%.

Schüssler suggests that Gauteng residents have always been the most indebted consumers in the country and that it is taking them longer to emerge from the recession. He nevertheless maintains that, across the board, a slow recovery is in sight.

Despite differences between the various provinces, the overall South African economy is showing definite signs of improvement in line with the global trend for emerging markets. As a consequence, forecasts for economic growth for the year have been revised upwards.

The improvement can be seen in the most recent data for extension of credit to the private sector (PCSE), vehicle sales and business confidence.

On a month-on-month basis, credit grew 0,6% during February after no growth in January. Retail sales declined unexpectedly in February, falling by 1,5% which was well below market expectations. With consumer confidence improving, we expect to see retail sales picking up in the months ahead. Vehicle sales continue to grow, albeit off a low base. All of these indicators point to a gathering of momentum in the economy.

Share prices already priced for recovery
In view of the strong run in equities from March 2009 to date, company share prices are discounting a lot of good news and a fairly strong recovery. It therefore looks likely that we will see only moderate returns for listed shares for the balance of 2010.