Western Cape economy cools down
Fin24 - Jul 13th 2012, 08:05
Cape Town – Together with the chilly Cape weather the Western Cape economy is also cooling down, as is evident from the May Sake24 and BoE Private Clients Western Cape Barometer.
But although the barometer's main index contracted 1.6% year-on-year (y/y) in May and average consumers and small business enterprises in the province were becoming more cautious, figures like vehicle sales stil show some punch in the provincial economy here and there.
Motor sales, for instance, were 11.2% better than in May last year and visits to hotels and restaurants 3.8% up.
Economists.co.za economist Mike Schüssler, who collects and analyses the barometer data, said although vehicle sales figures are not rising as strongly as they did three to five months ago, the double-digit growth shows that consumer expenditure is still relatively strong.
The weak spots in the economy are illustrated by the barometer's stress index, which rose 4.3% y/y in May and was 2.1% up on three months before. Schüssler ascribes this to unemployment in the Western Cape which stood at 23.6% in May, its highest level in two years.
In April it was 23.2%. Summonses for debt were 12.1% up on the year before and inflation in the region 5.3%.
The Western Cape is still feeling the impact of the global economic downturn through the weakening of the domestic mining industry.
Although the province itself does not have much in the way of mining operations, the manufacturing sector which produces goods and services for the mining industry is affected if the industry struggles owing to the shrinking global demand for raw materials.
The barometer's manufacturing index lifted only 0.8%.
The metal-manufacturing subindex fell a sharp 7.1% and the timber industry – which includes the manufacture of building materials, paper and furniture – was 1.8% down. These two subsectors contribute 14.7% and 12.7% respectively to the province's manufacturing index.
The petroleum and food industries are still doing well and grew 3.9% and 4.2% respectively.
The construction index was 14.9% down because timber sales fell 12.5%, and 17% fewer building plans were approved. Residential construction figures were 11% off, but the non-residential side dropped almost 50%.
Nevertheless there still appears to be growth in the informal building industry because sales at hardware shops rose 15% in May. Schüssler reckons this is partly in response to the weaker economy – people are opting to add a room or make alterations to their home rather than buying or building a new one.
The agricultural index rose 0.7% even though meat production was a steep 16% down owing to an oversupply of red meat, in particular.
The wine subindex, which is drawn from sales and production figures, was 1.2% up on the year before. According to SA Wine Industry Information and Systems, domestic sales rose 4.3% from May last year to April this year.
Wholesale wine exports rose 20.9% from June last year to May this year, but packaged wine exports were 13.3% down.
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