South Africa: Economic Recovery Gaining Traction

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Mariam Isa

SA's leading indicator for the business cycle surged in December while the pace of company failures slowed last month, adding to evidence the economic recovery is gathering momentum.

The leading indicator compiled by the Reserve Bank climbed 13,9% compared with December, up from 11,8% in November, its data showed yesterday.

That suggested official figures today may show economic output accelerated more than expected in the final quarter of last year.

Company failures fell 23,7% last month compared with the same month a year earlier, figures from Statistics SA showed yesterday, reinforcing the outlook.

"There is a reasonably good relationship between SA's leading indicator and overall economic activity," Stanlib economist Kevin Lings said. "This suggests the economy should show solid growth in the fourth quarter of last year and, more importantly, should continue to recover more fully into 2010."

The economy emerged from recession in the third quarter of last year, with output expanding just 0,9%. Consensus forecasts from Reuters predict gross domestic product grew 2,5% in the fourth quarter of last year, seasonally adjusted and annualised. But the rebound is being driven mainly by global demand for local exports and restocking of inventories - which have together boosted manufacturing, one of the economy's biggest sectors.

South Africa: Economic Recovery Gaining Traction