Leading indicator signals growth cycle
June 23, 2009
By Ethel Hazelhurst
A number of economic indicators are signalling the start of a growth cycle, according to the Reserve Bank. It said yesterday that seven of the 12 indicators making up its composite leading indicator were positive in April, while four were negative and one was not available.
The composite indicator, which signals the growth outlook six to 12 months ahead, turned positive again, after a false start in February. It rose to 106 in April from 104.6 in March, although it is still well below the 124.5 level of March last year. The false start in February took it temporarily to 105.7 from 105.2 in January.
However, the outlook for jobs is poor, with fewer job advertisements in the Sunday Times than a year ago and business confidence low.
A fall in manufacturing orders also weighed on the index, as did a plunge in the number of new passenger vehicles sold. Total vehicle sales fell 21 percent year on year in April, with passenger vehicle sales falling nearly 38 percent.
On the positive side, the composite index was buoyed by an increase in the average hours worked per factory worker; the number of building plans approved; an increase in cash in circulation; a rise in share prices; a rise in prices of South Africa's main commodity exports; and an improvement in the business cycle indicators of the country's major trading partners.
Also positive was that long-term interest rates were higher relative to short-term rates - a sign that economic activity is expected to improve.
There have been similar signs in the global economy. The 29-member Organisation of Economic Co-operation and Development's composite lead index rose in April for a second month. This is a harbinger of South African export growth.
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