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Thread: Recession or not?

  1. #1
    Site Caretaker Dave A's Avatar
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    Recession or not?

    I see the third quarter economic growth numbers are in, and they're not pretty.
    South Africa's economic growth rate slowed to 0,2% in the third quarter of 2008 on a seasonally adjusted and annualised basis, compared with an upwardly revised 5,1% growth in the second quarter, official data showed on Tuesday.

    The third quarter figure was the lowest in a decade.
    full story from M&G here
    So Trevor Manuel saying South Africa is not in a recession is technically correct, but we're shaving it pretty close. It is quite a drop and is also signficantly off the 6%+ growth target.

    So what is more important in our situation - inflation targetting or growth targetting?
    The trouble with opportunity is it normally comes dressed up as work.

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    Platinum Member Chatmaster's Avatar
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    Lets just add this disclaimer; I know very little about economy and finance so do not quote me;

    There is something that bothers me a bit about this whole outlook for the SA economy. First of all the reason for the situation we are in are often blamed on what hapened in the US. What everyone seems to forget is the effect that the NCA has had on us as South Africans. Let me start by saying this.

    Attorneys are retrenching
    Estate Agencies are closing down
    Car dealerships are retrenching staff
    Builders are battling
    The entire property development industry came from an over inflated industry to almost nothing.

    All of these things started happening since the implementation of the NCA.

    Now the entire situation just got worse by the international recession.

    My question is this. Isn't it logical to assume that the two factors together will actually amplify the problems for South Africa? Next year is going to be a very bad year for South Africans. Bad debt is going to kill many businesses and debt collectors are going to have the courts very busy. Unemployment will sky-rocket and we will break the 0% barrier and end up in a recession. This in my mind seems an obvious forecast. Sorry for disagreeing with all the economists but we will definitely hit the -% growth imo.

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    Diamond Member wynn's Avatar
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    I agree with the 'Master'

    Why are the conservative purchasers lumped together with improvident, profligate, wasteful, squanderers who splurge their income on overpriced and extravagent goods, vehicles and properties.

    Why can't the 'Powers That Be' reduce the interest rate by 4% or more on primary residences bonded under R1.5 million and qualifying purchasers of new properties requiring bonds under the same R1.5 million.
    Do the same for vehicles under R150,000.oo restricted to one per individual who qualifies.
    Remembering to revise this benchmark to keep up with any further inflation.

    This will make reasonable properties attractive to people that can afford them, existing bond holders able to take advantage of their capital gains when transferring or moving to other areas and people entering the market able to purchase cheaper starter homes.
    Cheaper smaller cars will be attractive to everybody.

    This will stimulate the economy at the same time discourage profligacy.

    Michael Moore made an interesting comment at the time of the US bail out. He said that the Richest people in the US could afford to pay the Billions required out of hand and not even really feel it.
    They would have to reduce the number of residential properties they owned from 8 to 5 and the number of vehicles they owned from 12 to 6 or there abouts.

    The same could apply here, don't stop the wealthy or improvident from owning what they want, just make them pay a penalty interest on any borrowed money needed to buy it.

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    Site Caretaker Dave A's Avatar
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    I'm also with Chathead. There are clear signs that large segments of the economy have been going backwards for a little while already. I'm wondering which segments have produced the growth that has countered those slides?
    The trouble with opportunity is it normally comes dressed up as work.

  5. #5
    Site Caretaker Dave A's Avatar
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    We're not the only ones that think the problem is even bigger than the numbers suggest.
    The average South African will not be surprised by the latest economic figures. You only have to drive down the road to see the empty car dealerships and talk to friends whose companies are starting to retrench to know that things are bad. Some wise person once said that data is nothing but the aggregation of anecdotal evidence.

    Michael Power, strategist at Investec Asset Management, says when he heard that car sales fell by 40% in the United States he knew something profound was happening in the world. Power says if economic figures move a few percentage points here or there it is just part of a normal economic cycle. But when data figures gap -- either up or down -- something is going wrong. Our economic growth figures moved from 5,1% to 0,2% in one quarter. That is certainly gapping; no incremental moves there. Our inflation figure dropped from 13,1% to 12,4% -- not a small move. These are dramatic indicators. "Something profound has changed. We can't dismiss it as a monthly oddity. It is too widespread and it is all happening in the same direction," says Power.

    Real GDP grew by 0,2% on an annualised basis compared with last quarter. Economists expected growth of between 0,3% and 0,4%. This is the lowest growth rate since the third quarter of 1998, when South Africa's economy grew at 0,5% for the year.

    Let's remember that we are still talking about third-quarter GDP, the quarter that ended in September and which has not factored in the economic fallout we have witnessed in the past two months.

    If it was not for construction and agriculture we would have seen a recession this quarter. Manufacturing, mining and retail, which make up 35% of our economy, are in full contraction. The Efficient Group says that mining production contracted by 7,3% on average during the first nine months of 2008. Manufacturing and mining are the sectors that will feel the full impact of the global crisis as demand for South African exports collapses and local demand continues to contract in the face of high interest rates and increasing job losses.
    full story from M&G here
    And I'd like to suggest that if you split public vs private sector funded construction, you'll see a nasty difference in those numbers too.
    In the past two weeks economists have radically cut growth forecasts. While they expect GDP for 2008 to hover at about 3%, many are calling a radical drop next year to less than 2%. Some economic units such as the Efficient Group and Nedbank Capital are as pessimistic as 1% growth, but others are a bit more optimistic. South Africa's Bureau for Economic Research revised its forecast for 2009 to 1,9% last week. But none is quite as optimistic as our own treasury, which last month set its 2009 growth forecast for 3%.

    In February Finance Minister Trevor Manuel took a swipe at the pessimistic economists who predicted economic growth to slow to 3% for 2008. Yet it is the Reserve Bank's stance so far that is the most worrying, as it controls the one instrument that can have an immediate and positive impact. Yet despite being a member of the G20, South Africa has refused to take part in the globally coordinated response to the crisis.
    When is Trevor Manuel and Tito Mboweni going to recognise these are far from normal times?
    The trouble with opportunity is it normally comes dressed up as work.

  6. #6
    Site Caretaker Dave A's Avatar
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    Solidarity reports that we are headed for an "unemployment recession."
    An estimated 310 000 workers stand to lose their jobs in widespread retrenchments, which began in July and are expected to continue until next June, according to trade union Solidarity.

    Paul Joubert, a researcher at Solidarity, said the union had arrived at this figure by extrapolating the current economic conditions and announced retrenchments, and studying job loss patterns during the economic downturns of 1988, 1993 and 2001.

    In its report released yesterday, the union said 32 companies were already retrenching about 22 000 employees. The hardest-hit sectors were mining and manufacturing.

    Firms that had announced retrenchments included:
    • Ford (800);
    • ArcelorMittal (2 000 contract workers);
    • DRDGold (1 700);
    • Lonmin (5 550 plus 1 400 contract workers);
    • Uranium One (2 600 contractors and employees);
    • New car dealers (3 500);
    • Second-hand dealers (1 500);
    • Absa (1 210); and
    • Mutual & Federal (600).

    The job losses would raise the nation's already high rate of unemployment to 25 percent in the first quarter of next year, up from 23 percent in the second quarter of this year.

    "If … every employee supports between seven and 11 dependants, it means that between 150 000 and 200 000 people will be affected by the retrenchments," said the union.

    Describing the situation as a "labour recession", Dirk Hermann, Solidarity's deputy general secretary, said South Africa had experienced net job losses of 74 000 in the third quarter and the situation was expected to worsen in the fourth quarter.

    Hermann explained that job cuts in primary industries raised the possibility of job losses in the secondary support sectors, such as suppliers.
    full story from Business Report here
    The trouble with opportunity is it normally comes dressed up as work.

  7. #7
    Site Caretaker Dave A's Avatar
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    For crying out loud!
    Retail trade sales for December 2008 decreased by 0,1% compared with December 2007, Statistics South Africa said on Wednesday.

    This was from a revised 4,4% contraction in November, the Pretoria-based agency said.

    This was the eighth month in a row that retail sales have declined.

    The year-on-year figure, however, was not as bad as had been anticipated, Nedbank economist Dennis Dykes said.

    "Based on anecdotal evidence, it seems that people stayed home in December and their entertainment was shopping rather than travelling -- so we may have had a temporary boost."

    The retail sales sector had been in recession since early last year, Dykes said.
    full story from M&G here
    The retail sector is a key indicator of how your citizens are doing.

    I'm sorry - the "we are not in recession" and "we are well placed" stuff is more than a trifle glib put in that light.

    The writing was already on the wall when the GFM hit. The private sector economy was already heading the wrong way and basically gov ignored it.
    The trouble with opportunity is it normally comes dressed up as work.

  8. #8
    just me duncan drennan's Avatar
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    Here is wikipedia's definition of a recession,

    In economics, the term recession generally describes the reduction of a country's gross domestic product (GDP) for at least two quarters.[1][2] The usual dictionary definition is "a period of reduced economic activity", a business cycle contraction.[3][4]

    The United States-based National Bureau of Economic Research (NBER) defines economic recession as: "a significant decline in [the] economic activity spread across the country, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."[5] The NBER's Business Cycle Dating Committee is generally seen as the authority for dating US recessions. Academic economists, policy makers, and businesses all usually refer to recessions as determined by the NBER.
    Although I like this one,

    A recession is when your neighbor loses his job.

    A depression is when you lose your job.
    According to Cees Bruggemans we have been in a recession since mid-2008,

    South Africa has remained mostly very quiet throughout this period of enormous turmoil, not least because our banking system wasn’t devastated by events, while our economy gave mostly the impression of only slowing down (though already effectively in recession from mid-2008).
    Regardless of the technicalities, it is critically important that we all deal with the reduction in growth rather than sprouting electioneering nonsense.
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