Port Elizabeth: MyPE

www.MyPE.co.za: While remaining well below the levels achieved during 2005 to 2007, the PEBCI continues to perform well and reflect growth in line with the higher than expected rate of growth achieved by the South African economy during the first quarter of 2010. The rate of month-on-month growth in the index is, however, slowing.

The rate of growth of the South African economy accelerated to 4.6 percent during the first quarter of 2010, up from the 3.2 percent achieved in the last quarter of 2009. Encouragingly growth during the first quarter was relatively well spread across all sectors of the economy and while led by mining and manufacturing also included signs that the demand side of the economy is beginning to recover with the sector wholesale, retail, motor trade and accommodation reflecting seasonally adjusted and annualised growth of 3.3 percent during the quarter. Furthermore, supported by low rates of both inflation and interest real retail sales grew by 1 percent in March, the first time in over a year that real retail sales have reflected growth on the same month in the previous year.

Households, however, despite some growth in real disposable income during the fourth quarter of 2009 that will have continued into the first quarter of 2010, continue in difficult circumstances carrying ongoing high levels of debt and being affected by a continued decline in levels of employment during the first quarter of 2010, a situation that is reflected in the ongoing contraction in overall credit extension to the private sector despite some improvement in both business and consumer sentiment during the first quarter of the year.

Looking ahead as the financial circumstances of households continue to slowly improve during the course of the year the demand side of the South African economy is likely to play an increasingly more prominent role in supporting rates of economic growth. However, while the economy is likely to be supported through mid-year by World Cup spending, possible fall out from the European financial crises could potentially impact growth during the second half of the year.

With regard to the details of the PEBCI, as in the case of the economy in general, most components are reflecting improvement with fourteen reflecting underlying trend cycle growth and one moving sideways.

The indicators that supported the PEBCI through March included growth in the trend cycle of new car sales in the metro which has bottomed out and moved into a phase of recovery, as has the trend cycle in the total new vehicle market in the country which is now also reflecting cyclical growth. The trend cycle in the real value of exports is reflecting growth, as is the trend cycle in the real value of imports. The trend cycles in the real value of building plans passed in the Metro and in the value of buildings completed are also reflecting improvement, and the trend cycle in passengers arriving at the PE airport has reflected some improvement. Furthermore the PEBCI was again supported by a decline in the local rate of inflation falling to 5.0 percent in April, and trend cycle growth in the real value of retail sales in the Eastern Cape which is reflecting slow recovery. The underlying trend in the JSE all share index also supported the PEBCI through April, a situation that may well be reversed in coming months as a result of the impact on the financial markets of the financial crisis in Europe. The PEBCI further benefitted by strong growth in the level of consumer confidence in the Eastern Cape during the first quarter of 2010 with the index rising to 26, the highest level since June 2004, from lower rates if interest and, after some hesitation, a resumption of slow growth in the trend cycle of the seasonally adjusted value of real manufacturing sales in the country. The underlying trend cycle in the price of gold also, once again, reflected growth through April.

The only indicator that did not reflect trend cycle growth through April was the trend in the Rand US dollar exchange rate which reflected predominantly sideways movement.

Nelson Mandela Metropole Business Confidence Indicator Year-to-Date April 2010

Dr Neal Bruton of RGT Smart Ltd, has compiled the PEBCI on behalf of PERCCI.