EDITORIAL: Economy offers sliver of hope
‘The upside is that at least over the year employment was in positive territory’
There is at least a chance that the economy could come out of recession in the second quarter, but there is no guarantee, and even a positive second-quarter number is unlikely to shoot out the lights.
That is the indication from economic data over the past week that continue to paint a gloomy picture — though in some cases not quite as gloomy as before.
The headline unemployment number from Statistics SA was as bad as before, at 27.7% in the second quarter.
The youth unemployment rate has risen to a horrendous 56%, up from 54.3%. Only 12% of young people aged 15-24 are in the workforce and about a third are in neither work nor education — so the proverbial ticking time bomb.
Employment declined in the second quarter 0.7% compared with that of the first quarter. Construction was the worst-hit sector, but others, such as agriculture and services, also experienced falling employment.
The upside, if upside it is, is that at least over the year, employment was still in positive territory, with the second quarter registering a 3.6% increase compared with that of the matching quarter in 2016.
The least bad of a bad bunch, however, is manufacturing production, which increased 1.5% on a quarterly basis
Perhaps more significantly for the economy’s fortunes in the second quarter, there was some job creation in trade and manufacturing. Those will be among the sectors the forecasters are watching closely as they try to tell whether SA’s economy will have a third negative quarter or will start to pull out of recession.
The mining and manufacturing data released on Thursday provide a patchy picture, but suggest that the slide may be slowing. Whether that is enough to halt it is not yet clear.
Mining production rose 0.6% in the second quarter, but on a year-on-year basis, it showed a decline of 0.8% in June, from a 4.1% increase in May, mainly because of the falling production of platinum group metals.
Mining was one of the only positives in the overall negative GDP figures for the first quarter, so it looks like it will at least not be a drag on the second quarter.
The least bad of a bad bunch, however, is manufacturing production, which increased 1.5% on a quarterly basis in the second quarter and could make a positive contribution to GDP for the quarter. That is despite the fact that it contracted on a year-on-year basis for each of April, May and June.
The latest month was hit by temporary issues at Sasol so the trend could improve.
But it’s mainly a case of clutching at straws to find the technicalities and the small bright spots that may help to lift the economy out of recession.
A key question will be how the services sector fares, particularly the financial services sector, given that it went negative for the first time in many years.
There are question marks too over the health of consumers and whether they are going to start spending again anytime soon. And although investment spending was positive in the first quarter, it is still running well below the level at which firms are expanding the capacity of the economy and laying the basis for higher economic growth rates in the future.
For now, economic policy is a mixture of the entirely hostile to investment – witness the Mining Charter and the latest attacks by Mineral Resources Minister Mosebenzi Zwane on the industry’s transformation efforts – and the simply dysfunctional. More than anything, economic policy is afflicted by a paralysis that could well last until the 2019 elections.
The damage that is being done to investor and consumer confidence will put the lid on economic growth for some time, and even though the numbers may not be negative, they are unlikely to be strongly positive either.