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SA leading indicator loses winning streak
September 23, 2009
The seasonally adjusted leading economic indicator in South Africa ended its three-month winning streak on Wednesday as it fell 0.18 percent month-on-month (m/m).
The indicator has been rising every month since the fall in March, but data released on Wednesday shows that the recessionary conditions will continue to bite for at least six months ahead.
The South African Reserve Bank's (SARB's) leading indicator for July was reported at 109.9 from a revised 110.1 (109.7) in June. This also ushers in a y/y fall of 8.64 percent as the index was at 120.3 in July 2008.
This index provides a barometer of economic growth for at least six months ahead.
The leading indicator had been over 120 and nearer to 130 for the whole of 2007 when the country was enjoying its best run since the Second World War.
Central Bank Governor Tito Mboweni said on Tuesday in keeping rates on hold at 7 percent that the economic recovery is expected to be slow despite the fact that the lower turning point may have been reached.
Mboweni noted that the leading indicator had increased for three months and predicts a recovery by the end of the year. He also pointed to some better readings on the manufacturing front.
The coincident indicator for June was reported at 134.6 from a revised 135.0 (135.3).
The lagging indicator was reported at 122.8 from a revised 125.0 (122.1).
The drastic declines in South Africa's leading and coincident economic indicators had cemented the idea that South Africa was in a recession. This was borne out in no uncertain terms when news broke of a 4.6 percent GDP decline in Q1 from 1.8 percent before.
In line with the leading indicator, a still negative, but slightly better GDP figure was seen in the second quarter and this transpired via a reading of 3.0 percent on August 18.
The coincident indicator is an economic factor that varies directly and simultaneously with the business cycle, thus indicating the current state of the economy.
The lagging indicator changes after the economy has already begun to follow a particular trend.
The SARB uses over 200 economic time series to determine the turning points of the South African business cycle.
Using these indicators, the leading, coincident and lagging composite business cycle indices are produced that indicate the direction of the change in economic activity rather than the level of economic activity. - I-Net Bridge
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