Trade data at odds with improving economy signs
October 1, 2009
By Ethel Hazelhurst
Trade data for August did not confirm the positive trend of the past few months. SA Revenue Service (Sars) reported a R1.98 billion monthly trade deficit yesterday, which brought the cumulative deficit for the year to R20.4bn.
The monthly deficit followed three consecutive monthly surpluses.
Standard Bank said the deficit might reflect the build-up in inventories "following massive stock run-downs over the past months".
The bank said: "The turnaround in the global economy next year paves the way for improved exports, (but) further trade deficits are on the cards in the short to medium term.
"After all, South Africa's production requirements are biased towards imported capital and intermediate goods and raw materials."
The decline in most of the major export sub-categories, such as metals, minerals and transport goods, accelerated year on year, said Citi economist Jean Francois Mercier, contrary to his expectations.
The trade account is one leg of the current account which has been in deficit since 2003.
The other leg is the services account which historically is always in deficit; so the health of the current account depends heavily on the trade balance.
The Reserve Bank Quarterly Bulletin showed recently that the current account deficit fell in the second quarter to 3.2 percent of gross domestic product, from 7 percent in the previous quarter. The sustainability of the improving trend remains to be seen and the August data is not encouraging.
Exports declined more than 9 percent, compared with the previous month, while imports dropped only 3.8 percent.
However, imports continued to fall faster over the first eight months, by 25 percent, to R359bn, while exports declined 21 percent to R338bn.
The category of exports that dropped fastest in August was vegetable products, down 30 percent. The import category most affected was "vehicles, vessels and aircraft", which was down 32 percent.
Between January and August the export category that fell most, by 40 percent to R47.2bn, was base metals.
Recessionary conditions over much of the year cut demand for industrial commodities.
The vehicle category fell 32 percent to R28.2bn and chemical products were down 24 percent in the period to R19.7bn.
The falls in exports were partially offset by a decline in the value of oil. The product is classified under minerals, which fell 34 percent to R76.8bn over eight months.
Of South Africa's major trading partners, the sharpest fall in exports has been to the US, down 43 percent, over the eight months, to R31.9bn. Exports to Africa have held up best, falling only 5 percent to R59.5bn.
On the import side, the biggest casualty was Africa, as imports from the rest of the continent plunged 40 percent to R24.6bn. This reflects a decline in demand for commodities, including oil, due to recessionary conditions.
Imports from other major trading partners fell between 20 percent and 27 percent.
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