Weak start to 2021, with uneven recoveries across sectors

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The latest set of business cycle indicators from the Reserve Bank reflect a weak start to the year.
The latest set of business cycle indicators from the Reserve Bank reflect a weak start to the year.
Allan Baxter

Economic activity got off to a weak start this year, data from the South African Reserve Bank shows.

The Reserve Bank on Tuesday released its latest set of business cycle indicators.

The coincident indicator - a measure of economic activity - increased at 0.1% on a month-on-month basis in January. Investec chief economist Annabel Bishop noted that the marginal lift in the coincident indicator reflects the dip in economic activity at the start of the quarter, compared to that of the fourth quarter of 2020.

The Reserve Bank noted that industrial production increased during the month. Similarly, Bishop pointed out that industrial production - such as mining and manufacturing - increased 0.4% on a quarter-on-quarter basis for the first two months of the year, compared to the first two months of the previous quarter. "February was a particularly strong month for the mining sector and March is unlikely to evince such strong growth with the load shedding which took place," said Bishop.

"Economic activity is very uneven between sectors and subsectors, which is to be expected as lockdown restrictions differentiated last year by sector and so there are differing levels of damage ... In general all sectors continue to display different speeds and stages of activity," she added.

The leading indicator - an early signal of changes in the economy or business cycles - increased by 2% in February. "The largest contributors to the increase in the composite leading business cycle indicator in February 2021 were an increase in the number of residential building plans approved and an acceleration in the 12-month rate of increase in job advertisement space," the SARB's report read.

The lagging indicator - which shows whether a shift in the economy has happened - decreased 1.3% on a month-on-month basis in January. According to the SARB this is due to a decrease in the real value of non-residential building plans completed.

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