GDP & Growth

extract from MMS Service 11-July-01

Do car sales signify a downswing in SA economy? 11-July-01
Summary: The topping out of car sales suggest that the business cycle may have peaked. This is unlikely, as the fundamentals suggest that it will simply be a temporary weakness, not unusual in economic upswings.

Analysis: There is a good correlation between the fluctuations of seasonally adjusted and smoothed car sales and the coincident business cycle indicator of Statistics SA. Because car sales seem to have peaked the question needs to be asked whether the coincident indicator, which is not as up to date as car sales (available for June) will decline soon. It needs to be remembered that a downswing is not a recession. The former is a decline in a number of cyclically sensitive sectoral indicators, while the latter is at least two quarters of a decline in real GDP. The two do not always coincide.

The Fundamentals suggest no downswing is coming now as consumer spending, government consumption, private fixed investment and the weak rand will all help to sustain economic activity and growth.

 

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e c o n o m e t r i x 11-Jul-01