/ 3 September 2010

Is the economy looking better or not?

Motorists welcomed the announcement by the Department of Energy on August 27 that the retail price of all grades of petrol would decrease by 10 cents a litre on September 1. This provided at least a little relief for people being pressed on all sides by rising food prices and the ongoing steady erosion of jobs.

“While the decrease in fuel prices is a positive development for motorists, consumers should still practice caution with their budgets, since there are conflicting signs about any economic recovery,” said Paul Slot, director of debt counselling at Octogen.

“There are hopes that there might be a cut in interest rates, since recent data shows that borrowing by companies fell again in July, indicating that there is still no real confidence in a strong economic recovery,” he said.

There has been a slight increase in household borrowing and data appears to show that consumer spending, the economy’s main engine, is “somewhat better”. “However, consumers should note that this does not mean that the recession is over and that good economic times are about to dawn,” Slot cautions. “In developed countries in the West, there is still considerable concern about a double-dip recession, with no clear signs that economies are strongly on the rebound. South Africa tends to lag behind these trends by several months, so it is unlikely that our own economy is going to recover dramatically any time soon. In fact, economic growth slowed by 1,4% in the second quarter.”

What does this mean for consumers? Slot recommends that consumers monitor their spending and keep a tight rein on their budgets.

“Now more than ever, it is advisable to shop around for the good deals and make sure one doesn’t incur unnecessary debt. It is preferable, and also less expensive in the long run, to save for items rather than purchasing them on credit.”

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