No recession in South Africa

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No recession in South Africa

Statistics SA has released its GDP statement for the third quarter yesterday.

The basic of it is that we grew but we only grew by 0.2% compared to the second quarter of this year.

This means we are slowing down but we are not in a recession. A recession is defined at two consecutive quarters of negative growth or contraction. Its close but we are not in the state that Europe is in where most of the Euro zone has already entered recessionary times.

This story was covered by most of the major news outlets today, with varying degrees of positivity.

The Times came with the headline 'Recession held at bay' and stated that we had scraped through into the positive side of zero. They noted that the 'finance, real estate and business services sector' had actually grown by 3.2% which helped to balance out the losses in other sectors.

Construction remained strong at 15%.

iAfrica carried a couple of comments by economists and carried a consensus survey result from I-Net Bridge which came down slightly high at 0.4% growth.

The Mail and Guardian stated that we were in for a period of much slower growth and that this was the slowest growing quarter in the last ten years. Nedbank economist Nicky Weimar called it a 'very weak positive'. But it's still not a recession, even though many were hoping for much more positive data than was released.

Business Day pointed to the hard hitting effects of currency fluctuations whereby it was now much more expensive for us to import anything. Agriculture was also a very strong performer, that while it contracted comparatively it was still growing at 16.1%, although agriculture only accounts for a very small portion of the economy.

Business Day also called for the Reserve Bank to step in and start cutting interest rates to boost the economy and stop a recession from happening next year. However it was also pointed out that policy makers could not really influence the global conditions that were forcing so many other economies into recession.

Local markets have already priced in these cuts and are expecting a total of four percentage points to be cut from the interest rate over the next year.

Business Report said that we were braking sharply, and that the annual growth this year was likely to be less than the 3.7% projected by Trevor Manuel.

Apart from the figures from Stats SA Business Report carried figures from the Organisation for Economic Co-operation and Development (OECD) which estimated our growth to be 3.3% for the year. This was in main due to our large current account deficit.

Well things could be worse, but we are in a period where times are very tight. Justmoney reckons that if you aren't saving, or don't have a budget you won't be able to get through these times without having to consolidate your debt or enter into debt management. The writing is on the wall for all to see, we have been warned.