A challenging outlook
Published |
|
2012
Thu
28
Jun
|
Opinion Piece by Luke Doig, Senior Economist,
Credit Guarantee Insurance Corporation]
The reliability of South Africa’s liquidation statistics has been hampered by the promulgation of the new Companies Act and the business rescue provision.
After showing a drop of 72% in May last year from May 2010, May 2012 has now seen a year-on-year rise of 151.4%, while prior months are also being drastically amended. For instance, March 2012’s original figure of 212 liquidations has been revised to 312 and April 2012’s from 230 to 274. This gives credence to Credit Guarantee’s initial incredulity at the initial sharp improvement in the figures. Year-to-date liquidations now only reflect a 12.6% fall compared to the first five months of 2011.
On the payment defaults front, our leading indicator has risen 4.8% in number in the first half of 2012 and the values involved by 20% although these are off their worst levels seen earlier in the year. Actual claims paid are some 17% lower in number for the first six months of 2012 but this is a backward-looking figure so we would caution against over-optimism.
Retail sales growth to slow
Following on from year-on-year growth of 4.2%, 6.7% and 6.7% in real retail sales for January to March 2012, April’s slowdown to real growth of 1% was attributed to the fact that consumer spend is being placed under increasing strain but this must also be seen against the very strong base created last year when April’s real retail sales leapt 10% year-on-year.
Retail sales by dealer type, real change
|
Type of retailer
|
2011 (y-o-y % growth)
|
2012 Jan-Apr (y-o-y % growth)
|
|
General dealers
|
5.3%
|
4.6%
|
|
Food, beverage & tobacco (specialist shops)
|
-1.2%
|
2.2%
|
|
Pharmaceutical/medical goods, cosmetics & toiletries
|
5.5%
|
4.2%
|
|
Clothing, footwear & leather
|
7.4%
|
6.5%
|
|
Furniture, appliances & equipment
|
10.2%
|
5.4%
|
|
Hardware, paint & glass
|
9.9%
|
5.3%
|
|
Other retailers
|
8.1%
|
6.5%
|
|
TOTAL
|
6.1%
|
4.7%
|
Source: Stats SA, Retail Sales, April 2012
As can be seen from the table above, real growth in retail sales has slowed in all but one type of retailer so far in 2012 compared to the performance in calendar 2011. The two notable decelerations in growth are sales of furniture, appliances & equipment and hardware, paint and glass where growth rates are approximately half those seen in 2011. Despite jobs not being under immediate threat, cost pressures on the household budget are playing a role and may see the non-durable sector (food etc) and semi-durables (clothing & footwear) benefit at the expense of other sectors. Real disposable income growth has slowed from 6.2% in the first quarter of 2011 (seasonally adjusted) to 3.2% in the first quarter of 2012 (SA). The strong showing in household consumption expenditure (PCE) of 5% last year following 2010’s 3.7% real improvement has been on the back of strong real improvements in disposable incomes. With rising cost pressures and slowing local and external demand, a question has to be raised about the likelihood of disposable incomes improving at similar rates in 2012. At issue then is the likely strength that can be expected in PCE and retail sales and any outcome over 4% this year will be a stellar result.
Stable rates for now
Following headline consumer inflation growth of above 6% (the upper limit of the target guideline) for seven successive months, CPI growth of 5.7% was registered in May 2012 at 4.6% if administered prices are excluded. The Western Cape (5.3%) and Gauteng (5.5%) encountered the lowest increases while the Eastern Cape (6.7%) and the Cape (7.2%) experienced the highest cost increases in May 2012. While we think that the SA Reserve Bank’s Monetary Policy Committee should take a proactive stance and reduce rates given the weak outlook, real prime (prime–consumer inflation) at around 3% is at its lowest for over a decade. Weak confidence is at the heart of weak demand. But would a cut of 1% not spur some activity? However, with the current account deficit widening sharply – and likely to remain above 4% of GDP for years - the SARB is only likely to cut rates aggressively should the global outlook worsen precipitously. Hence rates may stay on hold until deep into 2013.
Lower growth ahead
We are in the midst of the storm at present: The global growth path appears to be faltering, policy debate at home is threatening to result in possible sovereign credit rating downgrades, strike season is upon us and domestic demand is similarly at a low point. We do see improvement from here but this will be held hostage by the length of time it will require for Europe to address its woes, together with a challenging operating and business environment at home. However, growth rates of 2.75% this year and hopefully 3.5% next year do not provide much hope for the unemployed.
Source: Corporate Communications Consultants (Pty) Ltd
Breaking News »
|
