Double-Dip  or  Slow Growth ?

Third quarter 2010 economic round-up:

With all eyes on global growth, the second major US stimulus this week comes at a time of uncertainty as to whether the world economy could shrink further,  causing a ‘double dip’.

Consumers are tightening their belts, and paying off debt rather than walking the shopping malls, and this along with a soft jobs market has put the brakes on the growth experienced earlier this year.

The 2010 FIFA Soccer World Cup which boosted the GDP growth rate to 4.6% in the first quarter gave way to a more modest 3.2% in Q2.  Manufacturing, retail and accommodation industries contributed the most to the GDP in Q2,  while construction activity weakened from 2.1% in Q1 to 1.5% in Q2.  Residential building plans passed continued to rise,  while non-residential declined.

Consumer inflation is expected to continue on a downward trajectory. In June, a 4 year low of 3.7% was reached. It should average 4.6% for 2010, and 5.5% for 2011.

Interest rates are expected to remain stable until early 2011, but might rise to counter a strong rand thereafter.

Tendering prices (building costs) which had declined 5.2% in Q2 increased by 2.1% in Q3, but no further gains are expected.  The number and square metrage of building plans passed continued to decline.  This is not entirely surprising because, according to press reports, it is currently 29% more expensive to build a new home than to buy one. 

Looking at the FNB Building Confidence Index, improvements in levels took place amongst building contractors, and manufacturers and retailers of building materials. Sub-contractors and architects were less optimistic, while QSs were neutral.  The index increased moderately from 24 in Q2 to 29 in Q3.

Clive Hill