This economy of ours!

Economic data out for South Africa is painting a good, if slghtly confusing picture. The good news is that the economy is still growing healthily (not compared with China’s official growth though) and inflation has dipped down very slightly. Neither of these are truly unexpected though. Exchange rate appreciation and a relaxation in the dollar oild price will have had a muting impact on inflation.

CPIX (the basket excluding things like mortgage repayments and a few others) increased by 5% year-on-year in October. We only have data for October available now because of delays in collecting, collating and analysing data. This was slightly above forecasts, but nobody’s panicking yet. The same figure for September was 5.1%.
Meanwhile, growth in GDP is also continuing (4.7% annualised) in the third quarter, without showing much impact of the interest rate increases Tito Mboweni has put in place this year. Having said that, if one digs down into the sector details, the interest rates increases have not been completely ignored with property-related sectors showing markedly reduced growth from earlier levels.
Now for the confusing part. The previous quarter’s GDP growth has been upped to 5.5% from 4.9%.  First quarter figurees have been upped substantially from 4% to 5%, but last year’s growth adjusted only slightly from 4.9% to 5.1%.

So why all the changes? Well, before everyone goes on about “Lies, Damined Lies, and Statistics”, one should understand that estimating GDP is a tricky task in a developed economy, let alone one with a signficant contribution from an informal sector with limited records and reporting. As it is, there are discrepancies between information such as VAT receipts, money flowing through banks and the official GDP figures. While these measurements will be affected differently by different things, they should have a strong relationship to each other.

I’m going to dig into this as well over the next few months, but any comments or inputs are very welcome!

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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