Economic Developments in brief 3rd Quarter

Page 23rd Quarter 2011G L O B A L E C O N O M I C D E V E L O P M E N T S :T H I R D Q UA R T E R 2 0 1 1Economic growth inindustrialised countriesremains modest in the3rd quarterChina and Indiacontinue to driveeconomic growth amongemerging economiesBox 2: Annual Real GDP GrowthREGION 2009 2010 2011 * 2012 **World Output -0.5 5.0 4.0 4.0United States -2.6 2.8 1.5 1.8Japan -6.3 3.9 -0.5 2.3United Kingdom -4.9 1.3 1.1 1.6Sub-Sahara Africa 2.8 5.0 5.2 5.8Brazil -0.6 7.5 3.8 3.6Russia -7.8 4.0 4.3 4.1India 5.7 10.3 7.8 7.5China 9.2 10.3 9.5 9.0** ProjectionsSource: Respective Country Bureau of StatisticsContinued from Page 14. Rising inflation in most countries;5. Overheating in some emergingcountries;In its September 2011,World Economic Outlook (WEO),the International MonetaryFund (IMF) estimates globalgrowth to average 4.0% in 2011compared to 5.0% in 2010. Thisshows that IMF views the globaleconomic situation in 2011 asmore gloomy compared to2010. In the United States (US),IMF estimates growth to average1.5% in 2011, comparedwith 3,0% in 2010 (Box 2). Economicgrowth in the euro areais estimated at 1.6% for theyear 2011 compared with 1.8%in 2010. In the United Kingdom(UK), growth of just 1.1% isprojected for 2011, comparedwith 1.4% in 2010. For Japan,the IMF estimates negativegrowth of 0.5% for 2011 comparedwith a positive 4% in2010.the highest economic growthduring the period under review.Strong growth in Japanpushed economic growth inthe OECD growing from 0.3%in the 2nd quarter to 0.6% inthe 3rd quarter. Fiscal instabilityin major industrialisedcountries such as the US, UK,Italy and Spain remain a challengeto global economicoutlook.Emerging EconomiesIn emerging marketeconomies, China (9.1%) andIndia (6.9%) continued todrive global economic growthin the 3rd quarter. The Chineseeconomy cooled off duringthe 3rd quarter of 2011 aftergrowing at 9.5% in the 2ndquarter. The IMF’s China andIndia growth forecasts for 2011are 9.5% and 7.8% respectively(Table 2-1). Buoyant commodityprices (gold, platinum, oil) andrelatively stronger global consumerdemand are the majordrivers of economic growth inemerging markets. However,strong commodity prices maybe temporary, to the detrimentof emerging markets growthoutlook. The high growth prospectsin China and India comeat a time when growth prospectsin other emerging countriesare not pleasing. For instance,within the BRICS groupof countries, the IMF expectseconomic growth to average3.8%, 4.3% and 3.4% in Brazil,Russia and South Africa.Growth prospects in thesecountries and other emergingmarkets are weighed down byfactors such as the Euro debtcrisis (which is not favourablefor global trade), high food andfuel prices in low-income countriesand debt overhang fromthe recession for both emergingmarkets and industrialisedcountries.Box 3: Emerging Markets Growth TrendsIndustrialised CountriesEconomic growth in industrialisedcountries remainedmodest in the 3rd quarter withthe US (2.5%) and Japan (1.5%)recording the highest growthrate (Box 1). However, on anannual basis Germany postedSource: Respective Country Bureau of Statistics

Page 33rd Quarter 2011E C O N O M I C T R E N D S I N SAEuropean debt crisisand financial crisis inGreece has negativeimpact on SA’s GDPBox 6 : Annualised Quarter-onon-Quarter GDP Growth per Sector (%)Industry 2010 2011Q1 Q2 Q3 Q4 Q1 Q2 Q3Agriculture, forestry and fishing 4.9 13.6 16.3 12.5 -3.7 -7.8 -4.3Mining and quarrying 18.7 -24.5 33.7 17.1 -4.0 -4.2 -17.4Manufacturing 8.3 5.7 -4.9 4.1 14.5 8.8 -1.9Electricity, gas and water 4.9 -1.7 -2.2 5.6 3.3 1.0 -2.6Construction 1.3 1.0 0.8 0.2 0.0 0.8 1.8Wholesale and retail trade, hotels, and restaurants3.1 6.0 3.3 3.5 4.4 5.2 6.1Transport, storage and communication 2.4 4.5 3.0 4.2 3.6 4.3 2.3Finance, real estate and business services 3.2 4.0 1.4 1.7 4.8 2.7 4.5General government services 1.2 4.6 0.5 5.7 1.8 5.8 3.9Personal services 3.5 3.6 3.1 3.3 2.7 2.7 2.5Total value added 4.6 2.7 2.6 4.5 4.6 0.8 1.3Taxes less subsidies 6.5 4.0 3.9 4.5 3.4 4.8 2.9GDP at market prices 4.8 2.8 2.7 4.5 4.5 1.3 1.4Source: Stats SA, November 2011ross Domestic ProductG growth continued toremain depressed in the 3rdquarter of 2011, recording agrowth rate of just 1.4% onthe previous quarter (Box 6).After two previous quarters ofrelatively robust growth (4.5%)the poor performance of thenational economy in the 2ndand the 3rd quarters significantlydampens optimism forstrong, employment-creatinggrowth in the immediate future.While GDP grew by 3.1% onan annual comparison, thesharpness of the decline betweenthe 1st and 2nd quar-ter, and thereafter sustained inthe 3rd quarter of 2011, wouldsuggest that South Africa continuesto struggle to shrug off thelegacy of the 2009 recession.The European debt crises and thefinancial crisis in Greece in particular,as well as continued sluggisheconomic growth in developednations has had a negativeimpact on South Africa’s GDPgrowth in the 3rd quarter. Thisnegative impact is a result oflower international demand forexports (excluding commodities)as well as declining levels of foreigninvestment in South Africa.South Africa’s average GDPgrowth rate for 2011 to date, isbelow the IMF’s 2011 forecastfor South Africa of 3.4%, andwould suggest that the economyhas performed unexpectedlypoorly, particularly in the 2ndand 3rd quarters. China, amember of the BRICS group,experienced an economicgrowth rate of 9.1% in the 3rdquarter just 0.4% below theIMF’s forecast for China for2011. Low GDP growth, alsosignificantly constrains thecountry’s prospects of creating5 million new jobs by 2020 asthe New Growth Path specifiesthat a growth rate of 4-7% isrequired to meet this targetThe Rand posts weakerexchange rate against theUS dollarE XC H A N G E RAT EThe South Africancurrency (ZAR)posted a relativelyweaker exchange rateagainst the dollar in the 3rdquarter of 2011 compared tothe 2nd quarter of 2011. Accordingly,the third quarterregistered an average exchangerate of R7.14, comparedto R6.79 in the precedingquarter against the USdollar.On average, the rand alsodepreciated against other majorcurrencies such as the Euro(€) and the Pound (£) in theperiods under review. The October2011 exchange rate wasthe weakest it has been againstall currencies since 2009. Forinstance the rand value againstthe US dollar peaked at R7.97in October 2011. The last timethe dollar exchange rate wasthis high was in July 2009.During the 3rd quarter theRand depreciated from R6.79in July to R7.09 in August2011, and continued weakeningto R7.54 in September2011.

Page 53rd Quarter 2011L A B O U R MARKET TRENDSBox 7 : Unemployment in KwaZulu-Natal and Other Comparable RegionsDecrease inunemployment in 3rdquarterIncrease in headline CPIfor all urban areasSource: DEDT Calculations based on Stats SA, 2011UnemploymentI N F L A T I O Ndecreased by96,000 in thethird quarter to atotal of 4.42 million unemployedpeople in South Africa. Price Index (for all urban areas)T he headline ConsumerThis substantial drop in unemploymenthas resulted in a decreaseof 0.7% in the unemploymentincreased to 5.7% in September2011, up from 5.3% in Augustafter no increase between July andto a rate of 25%. August. On average the pricesSimilarly the expanded unemploymentrate dropped from36.9% in the second quarter to36% in the current quarter.This can be attributed to both adecline in ‘searching’ unemployment(96,000) as well as aslight decline in the number ofincreased by 0.4% between Julyand September (Stats SA, September2011). A combination of supplyside shocks (such as a rise inoil prices), administered pricesincreases and wage settlementswell in excess of inflation, resultedin the CPI measures increasingdiscouraged work-seekers (-3,000).Seven out of the nine provincesexperienced decliningstrict unemployment rates inthe 3rd quarter of 2011. TheWestern Cape was the onlyprovince to experience an increasein both its strict (1.5%)and expanded (1.4%) rates ofunemployment in the 3rd quarter(Box 7). KwaZulu-Natalexperienced a 1.2% decline inits’ strict rate and a 1.5% declinein its expanded rate on aquarter by quarter basis anddeclines of 0.6% and 1.1%respectively on an annual basis.The province’s strict rate ofunemployment (19.1%) comparesfavourably with the WesternCape (23.3%) and Gauteng(27.8%), as portrayed in Box 7.dramatically from 3.2% inSeptember 2010 to 5,7 % inthe same period this year(2011).The Producer Price Indexcontinued its strong upwardtrend, increasing to 10,5 % inSeptember, from 9.6% in August,and 8,9% in July.The September 2011headline inflation per provinceregistered an increase relativeto the previous month of yearunder review, throughoutprovinces (see Box 8).Box 8 : Geographical Headline Inflation (%): )Aug ‘11-Sept ‘11)Source: Stats SA, September 2011