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Business climate monitor shows reduced economic contraction

18/01/2018
by Kelvin Chiringa
Business

At the close of November 2017, the IJG Business Climate Monitor continued its upward trajectory with an increase of 0.54 points having been recorded for November, bringing the index to just over 48 points.

The leading indicator climbed a healthy 4.7 points after a 3.6-point increase in October.

This suggests that the economy is still in a contractionary period, although it is contracting at a slower rate, should this trend continue, it points to growth in 2018, the Institute for Public Policy Research (IPPR) has said.

Of the 31 indicators measured by the index, 18 increased during November, while the remaining 13 deteriorated.

“Basically what it means is not that the economy is growing faster, it just means it’s contracting at a slower rate. It’s quite likely because it’s towards the end of the year. You’ve got more construction happening in the economy. With Christmas coming up you see a lot more expenditure, you see people are consuming more.”

“Whatever funding a lot of companies will have, expires towards the end of the calendar year so they will start using that,” says IPPR’s business climate compiler and analyst Robert McGregor.

On the commodities side, prices remained flat except uranium, which saw an increase of 16.5% to US$23.25 on a monthly basis (well below the price required by domestic mines). 

On a 12-month basis, uranium, copper and gold prices have seen growth (of 31%, 9% and 16% respectively), which is encouraging for the long-term outlook of the industry.

Credit extended to individuals continued to subside, particularly in instalment credit, which is reflected by the trend in slowing vehicle sales.

Weaker passenger and commercial vehicle sales are a reflection of the contractionary pressures both households and corporates find themselves facing.

On a more positive note, approvals in building plans increased by over N$80 million in November.

The number of building plans approved within the Windhoek municipal area by November 2017 contracted by 1.3% 12 month rolling average to 2 002 units, compared to a contraction of 26.6% in the prior year.

On a monthly basis, building plans approved increased by 43.4% compared to an increase of 101.1% in the prior month, reported Simonis Storm Securities.

Annual inflation remained unchanged, easing some of the burden on consumers, especially in the run-up to the festive season.