Consumer-led upswing needs investment to become self-sustaining
Public sector is not in a position to start spending so private sector needs to rise to challenge, writes Ettienne le Roux
The sluggish business cycle is finally showing sure signs of having bottomed out. After two successive years of near stagnation, growth accelerated from 0.6% in 2016 to a year-on-year rate of 2% in the fourth quarter of 2017. However, the upswing is unbalanced. Essentially, the recent expansion in GDP has come from one source, consumer spending. The revival in consumption itself is not surprising, benefiting as it has from the rand-induced fall in inflation, declining interest rates and strong wage inflation, a combination of factors that has clearly outweighed the income-draining effect of consumers’ rising tax burden. Yet history is clear: if a consumer-led upswing is not complemented by more investment soon, it cannot become self-sustaining. By boosting the country’s production capacity, a dose of investment will not only give the economic recovery further thrust but feed back into added support for consumer spending through increased job creation and higher disposable income. On...
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