KZN fares pretty well

2014-05-06 00:00

KWAZULU-NATAL’S economy did well in February compared with last year, but labour unrest and higher interest rates caused the first month-on-month decline in seven months.

The KZN Barometer, as compiled by Mike Schüssler of Economists.co.za, gained 3,8% year-on-year, but declined by 2,4% month-on-month, the first decline in seven months.

Agriculture boosted the province, mining was up, construction improved only marginally, more electricity cutbacks are expected and manufacturing is still struggling.

The year-on-year improvement in the Barometer was not surprising given 2013 started with the after-effects of the events at Marikana in 2012.

Because of the low base this created, the month-on-month comparison is a better reflection of what happened in the KZN economy.

The effect of an interest rate increase usually shows up quite quickly in the barometer, but in this case the rate hike of 50 basis points was possibly too small, Schüssler said in a statement.

But the result of the rate increase was clearly visible in the month-on-month performance of the KZN stress index.

This index, which measures indicators like interest rates, inflation and unemployment, rose 1,5% month-on-month, the first increase in six months.

With rising inflation in KZN almost touching the upper end of the Reserve Bank’s three to six percent inflation target, economic stress is expected to start having a negative effect in the province’s economy, he said.

The agriculture index was up 3,3% year-on-year and 0,4% month-onmonth. Increased maize production helped to grow crops by 38,1%, while cattle and pork production and sugarcane crushed also increased.

The mining index increased year-on-year for the second month, but the four percent increase was a marked slowdown from the previous month’s 14% jump. Month-on-month, the index was down 23,8%.

“Coal production, which accounts for 72% of mining in KZN, was down eight percent from a year ago, while mining of building materials was up 12%, following a 35% increase the previous month. Building materials are providing a welcome and unexpected boost to mining in KZN,” said Schüssler.

Construction increased 1,3% year-onyear, the first rise in 14 months, but it was not likely the start of a positive trend.

The KZN electricity index was up only 0,8% year on month, compared to growth in excess of four percent for several months last year.

Month-on-month, the index dropped 8,9%.

Even before the recent general load-shedding by Eskom, several big electricity users had already cut their usage substantially at request of Eskom — these cutbacks are expected to continue and even get worse in the coming winter months.

Manufacturing is still struggling and with a one percent decrease it was the only index in the Barometer that declined year-on-year.

“This is not good … in KZN manufacturing contributes almost 26% to the provincial economy, and for South Africa, the sector accounts for around 15% of gross domestic product.”

Schüssler said the sector has been struggling to catch up following the labour unrest last year.

The trade index grew 4,4% year-on-year. There was a a small increase in retail sales, but the big boost came from the 7,1% increase in wholesale, which shows that wholesalers are still building inventory to hedge against expected increased inflation.

Vehicle sales were up 8,5%, the first time in four months that car sales in KZN did not grow by double-digits.

Arrival numbers at King Shaka International Airport have been declining for two years and were down 2,2% in February.

The decrease is not as big as some of the decreases recorded last year, showing that arrival numbers may start to pick up later this year, said Schüssler.

Spending by national, provincial and local levels of government grew five percent year-on-year.

Month-on-month the index was down 2,4% — somewhat unexpected given that government spending usually increases as elections and the end of the government financial year draws closer.

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