Flat S.African economy pulls down composite leading index - CNBC Africa

Flat S.African economy pulls down composite leading index


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The year-on-year percentage change in the indicator declined by -2.36 per cent in March. PHOTO: Getty Images

The indicator declined month-on-month to 0.47 per cent, and the smoother 3-month moving average was also negative to the tune of -0.25 per cent.

“The decline was driven in part by global factors, with commodity prices for South Africa’s major exports contributing negatively,” John Loos, household and property sector strategist at FNB Home Loans, said in a statement.

“However, this month, the leading indicator of South Africa’s major trading partners contributed positively, as the global economic recovery continued on its way.”

(READ MORE: S.Africa keeps rates held at 5.5%)

Loos added that additional negative contributing factors were the level of job advertisements, building plans approved, the spread between long and short term interest rates – 10 year government bond yields minus the rate on 3-month Treasury Bills , which speaks to interest rate expectations –  and weak vehicle sales numbers.

The year-on-year percentage change in the indicator also declined further by -2.36 per cent in March, compared to a similar -2.7 per cent decline in February.

“The further year-on-year decline continues to support our view of increased financial pressure on the household sector in the near term, which can have implications for both credit health as well as household-related lending growth,” Loos explained.

(READ MORE: S.Africa economy contracts for first time since 2009)

Where new mortgage loans are concerned, the growth direction in value of new mortgage loans, according to Loos, has broadly tracked the direction of growth in the Leading Indicator. With the Indicator’s year-on-year decline, however, could imply near term slowing in growth in new mortgage loan pay-outs for both commercial and residential properties.

Year-on-year property-related transfer duty revenue growth also broadly tracks the growth direction of the leading indicator. Loos anticipates to see a slowing in the growth too in coming months.

“Although the rate of decline in the leading indicator did not accelerate in March, the ongoing monthly decline continues to point to a weak household sector financial performance, caused by a flat economy,” said Loos.