BER DATA BANK

1
Prospects for the World SA economies
BER presentation to the
Parliamentary Committee on Trade Industry
Ben Smit 6 November 2002
2
Outline

• Global economic outlook
• Domestic economic prospects
• Manufacturing sector survey

3
Global Economic Outlook
4
Global economic outlook

• Initially unexpectedly strong recovery to 2002
  and 9/11 slowdown
• Industrial recovery has stalled
• US consumer confidence declines again

5
Recovery in the US industrial sector has stalled
Sept 2002
PMI / ISM
Oct 2001
6
US consumer confidence weaker
Sept 2002
Michigan survey
7
World economic outlook the growth numbers (JP
Morgan)
2001 2002 2003
Real GDP growth
USA 0.3 2.3 (3.0) 2.7 (3.3)
Euro area 1.4 0.8 (1.3) 1.9 (3.1)
Japan -0.3 -0.8 (-0.3) 0.3 (1.7)
Asia excl Japan 3.7 5.3 (5.4) 5.5 (5.8)
Latin America 0.2 -1.5 (-1.0) 0.1 (3.1)
Global developed 0.7 1.2 (1.7) 2.0 (2.9)
Global emerging 2.2 2.8 (2.8) 3.4 (4.7)

( ) May 2002 forecast
8
Domestic Economic Prospects
9
Recent SA developments

• Growth slowed in 2001 (from 3.4 ? 2.2) but
  economy proved resilient
• Real sector activity surprisingly strong in Q3
• Exchange rate relatively stable around R10.50/
• Inflation rates keep surprising
• 400 basis point interest rate increase

10
Recent SA developments(continued)

• From 68 in 02Q2 to 68 in 02Q3
• Manufacturing (69 (69))
• Building (45 (42))
• New vehicles (54 (67))
• Retail (69 (69))
• Wholesale (89 (91))

11
FNB/BER Consumer Confidence Index

• Consumer sentiment slightly weaker in 2002Q3
• Still holding up relatively well

12
Purchasing Managers Index
October 2002
13
South Africas inflation trend
14
Current SA conditionsR/ exchange rate
15
Outlook Inflation

• Current 11.8 (CPIX), 12.5 (CPI), 15.4 (PPI)
• Exchange rate impact to pass
• Food prices
• Longer term anchors
• International competition low world inflation
• Conservative fiscal policy
• Inflation targeting

Forecast
16
Outlook Economic growth

• Stable growth since 1994
• Export growth essential
• Upswing form 1999 to 2004/5 (?)
• Employment growth essential for domestic response

Forecast
17
Outlook the numbers
2001 2002 2003 2004
Final consumption exp 2.8 3.0 2.9 3.5
Fixed investment 3.3 5.4 5.2 7.6
Exports 2.4 1.8 5.7 7.3
GDP 2.3 2.7 3.0 3.5
CPI 5.7 9.6 7.4 3.7
CPIX 6.6 9.6 7.3 5.4
Prime Rate (eop) 13.00 17.3 15.5 14.5
R/ (eop) 8.60 10.55 11.24 11.66
18
Manufacturing Survey
19
HighlightsThird quarter 2002

• Confidence remains at a high level
• Solid increase in domestic sales, better than
  expected
• Export sales edge higher
• Decline in stock levels
• Small rise in employment, first in 7 years
• Rise in actual fixed investment and intentions

20
Manufacturing TotalBusiness Confidence Index
21
Domestic sales volumes
Expected
22
Domestic sales volumes(BER survey 02Q3 compared
to 01Q3)
23
Export sales volumes
Expected
24
Export sales volumes(BER survey 02Q3 compared
to 01Q3)
25
Current stocks of finished goods
26
Production volumes
Expected
27
Number of factory workers
Expected
28
Number of factory workers(BER survey 02Q3
compared to 01Q3)
29
Fixed Investment
Expected
30
Real fixed investment 2002Q3(machinery
equipment 12 month outlook)
31
Western Cape
Expected
32
Eastern Cape
Expected
33
BUREAU FOR ECONOMIC RESEARCH
Economic Information that works for You
www.ber.sun.ac.za E-mail hhman_at_ber.sun.ac.za