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SA leading economic indicator +13.6% y/y vs 11%
Johannesburg, Feb 22 (I-Net Bridge) South Africa’s economy has well and truly turned the corner, if the latest leading economic indicator is anything to go by.
The country’s seasonally adjusted leading economic indicator continued to rise in December, increasing to a 120.9 index level from a revised 120 (119.8) In November.
This represents a 13.6% year-on-year increase for December versus an 11% y/y rise for November.
Apart from an aberration in July 2009 when it broke a three-month winning streak, the indicator has been rising every month since March 2009.
Property strategist from FNB, John Loos, says the indicator still bodes well for near term residential mortgage market performance.
“The December SARB Leading Indicator continued to see its year-on-year growth accelerate. Given its good correlation to new residential mortgage grants, the Leading Indicator is a good indicator to watch for near term future signals of strength or weakness in the residential mortgage market.
“Further acceleration bodes well for further growth in new residential mortgage demand, but it has been noticed that the pace of acceleration in year-on-year growth in the indicator slowed a little, possibly an early sign that mortgage market growth will approach its peak in a few months time as last year’s interest rate cutting stimulus wears thinner,” Loos says.
The data showed that things have slowed quite a bit a monthly momentum basis at 0.75% in December from the 3.18% month-on-month (m/m) growth in November.
This index provides a barometer of economic growth for at least six months ahead.
The leading indicator had been over 120 and nearer to 130 for the whole of 2007 when the country was enjoying its best run since the Second World War.
The coincident indicator for November was reported at 138.6 from a revised 137 (135) a month before. The lagging indicator was reported at 119.3 from a revised 119.6 (119.3).
The drastic declines in South Africa’s leading and coincident economic indicators had cemented the idea that South Africa was in a recession. And this was borne out in no uncertain terms when news broke of a 6.4% GDP decline in Q1 last year from 1.8% before.
However, the country has now officially pulled itself out of the recessionary quagmire. South Africa’s real gross domestic product (GDP) at market prices on a quarter-on-quarter (q/q) seasonally adjusted annualised (saa) basis rose by 0.9% in the third quarter of 2009 from a revised -7.4% ( 6.4%) in the first and a revised -2.8% ( 3.0%) in the second quarter.
This snaps the first instance of three consecutive quarters of negative growth seen since the fourth quarter of 1992.
GDP data for the fourth quarter is due on Tuesday.
The coincident indicator is an economic factor that varies directly and simultaneously with the business cycle, thus indicating the current state of the economy. The lagging indicator changes after the economy has already begun to follow a particular trend.
The SARB uses over 200 economic time series to determine the turning points of the South African business cycle. Using these indicators, the leading, coincident and lagging composite business cycle indices are produced that indicate the direction of the change in economic activity rather than the level of economic activity.
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