Miriam Isa
26 May 2009
SA's leading indicator of economic growth, which predicts trends six to 12 months in advance, fell by a record 15,1% in the year to March — backing fears this year's recession may be worse than expected.
Finance Minister Pravin Gordhan will address the media today after the release of official data likely to confirm the economy has slid into its first recession in 17 years.
Markets are betting that output fell 3,9% in the first quarter, more than twice as steeply as in the previous quarter. Two quarters in a row of shrinking output signal the onset of recession.
Economists warn there is scope for shocks in today's Statistics SA data, which will probably take centre stage in the Reserve Bank's repo-rate decision on Thursday.
"SA's expected recession is proving to be deeper than initially anticipated, mainly because the global economic downturn is more severe," said Investec economist Annabel Bishop.
The risk was that today's data release would be "worse than the market expects. I wouldn't be surprised if the contraction was in the region of 5%."
Yesterday's leading indicator data suggested SA's recession could be as bad as in some quarters of 1982 or 1992, when the economy contracted by 2,2%, Bishop said.
Gordhan told Business Day this month that after the release of first- quarter data on economic output the Treasury would update the public on how it expected the economy to perform this year.
Its February budget forecasts predicted the economy would expand 1,2% this year, slowing from 3,1% last year. Since then, the global financial crisis has deepened. The composite leading business cycle indicator — compiled from surveys, share prices, and data from SA and its main trade partners — dipped to 105,4 in March from 106,4 in February, data from the Bank showed yesterday. That followed a small rise in February, its first in a year.
"This is the lowest point in the current business cycle, and it shows the leading indicator has not reached a lower turning point yet," said the Bank's economist, Ian Venter. It might be premature to assume the economy would rebound this year, he said. The leading indicator has descended from a peak of 127,2 in March 2007.
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