SA 'heading towards recession'

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boramk

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Johannesburg - South Africa is heading towards a recession, although this should be considered in the context of nine years of sustained growth.

This is according to Dave Mohr, the chief economist at Citadel, who suggests a recession could set in within the next two years.

He says this would be a typical adjustment, however, following a long period of growth, as it has been nine years since the country's last recession.

Mohr says that before a recession becomes a reality in SA, five areas need to be considered: a world recession; a commodity price collapse; a capital flow shock; debt deflation and inflation.

Mohr says that there is little dispute that the USA is in a recession already. The question really is whether the rest of the world will follow the United States down that "recession road".

Given that emerging markets export around 60% of their industrial production to the developed world, and that emerging markets accounts for 40% of the real US dollar purchasing power, Mohr contends the world is very close to recession.

In terms of commodity prices, Mohr says that while these prices are still buoyant, they may be an artificial buoyancy, buoyed instead by hedge fund managers and pension funds that see commodities as an investment opportunity, and not by increased demand from countries.

On the issue of debt deflation, Mohr maintains that a common mistake is to compare the country's consumer indebtedness with that of developed countries. This is dangerous as consumers in developed countries earn significantly higher salaries, and they generally have assets that can be used to back-up their debt.

The rise in South Africans' inflation expectations is also a factor; economists have suggested that the country will only return into the 3% to 6% inflation-targeting zone in 2010.
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recession - your neighbour loses his job
depression - you join him

talked abotu in another thread on monday about the uk being broke where i came across as a bit of a nutcase, but if you dig deep enough all the signs are there i think. last nights bbc news made great viewing, people are in denial, the morning papers carried the story...house price crash. i reckon s.a. is on an elastic band to uk, giving it around 6-12 months before similar happens in the land of beauty. was reading something yesterday about the (unheard of) decrease in s.a. property prices. it's all happening folks, if you are debt free, sit back and open a tinnie and enjoy the show, for everyone else i would suggest batten down the hatches, pay off debts, DO not take on extra credit and be prepared to weather the storm out.
 
st0rm3rs said:
I wonder what Sir Lancelot has to say about this?
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It's as if you guys are happy everytime you read bad news???

The US is also in a recession and it's not the first time for us either. What did we blame it on 9 years ago?

The question really is whether the rest of the world will follow the United States down that "recession road".
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And it's not just SA which may be heading that way...
 
Retro said:
It's as if you guys are happy everytime you read bad news???

The US is also in a recession and it's not the first time for us either. What did we blame it on 9 years ago?



And it's not just SA which may be heading that way...
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Where have you been bru? Apartheid!
 
The official definition of a recession is two consecutive quarters of negative growth. I think that the expect 3.5% - 4% growth this year might be a bit optimistic considering that everybody is having to cut back their power by 10%.
 
Housing prices are going to slump world wide if you ask me.. its not s omething thats just going to effect the US and the UK.
 
Retro said:
It's as if you guys are happy everytime you read bad news???

The US is also in a recession and it's not the first time for us either. What did we blame it on 9 years ago?



And it's not just SA which may be heading that way...
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Do you honestly think we love recessions. A recession is on the way, yay! Economics dictates, through history, that a economic high is followed by a recession.

However, a lot of people (possibly) believe we could be better off (economically) if we didn't have monkeys running the country.

Eskom point in case.
 
Moederloos said:
A recession is positive. It is like pruning a rose bush in winter, so that in the spring it has more energy to grow.

:p
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Mbeki:
"But a recession is GOOD, because it indicates the economy has had positive growth, which will repeat again after the recession, which is GOOD."
 
well puts things into perspective, all relative, if you've had average growth of 9% for 9 years then in year 10 it drops to 3% that's a recession but it's hardly an economic melt down, it's simply a recession based on a 6% drop in growth. When growth is a -3% then one should panic yes... or am I talking rubbish here?...
 
Skinner said:
Mbeki:
"But a recession is GOOD, because it indicates the economy has had positive growth, which will repeat again after the recession, which is GOOD."
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Heh - well, it is GOOD! We are only able to HAVE a recession owing to the fact we had growth in the past!
 
sandmanm34 said:
well puts things into perspective, all relative, if you've had average growth of 9% for 9 years then in year 10 it drops to 3% that's a recession but it's hardly an economic melt down, it's simply a recession based on a 6% drop in growth. When growth is a -3% then one should panic yes... or am I talking rubbish here?...
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hmmm..i know what you are implying but there are more factors at work here.
#1 inflation tends to erode "growth" that is lower than inflation..basically, you are pedalling forwards but going backwards
#2 if you had the money would you put it into houses at 3% growth, or a bank account/investment scheme? e.g. absa give 9% on most of their bank accounts for balances over R100,000

both of these mean that once house price increases end up less than stellar, the smart money goes elsewhere and starts selling houses, compounding the problem.
 
Ady said:
Maybe then some of us can afford to buy a house.
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I wouldn't count on that. House prices in South Africa have tripled in the last ten years. The slump they're referring to in the UK is not likely the undo the bulk of the price growth there. You may catch up if you are not too far behind and can grow your income in the interim before the prices rise again.

In the UK the government is taking steps to stimulate increases in house prices.
 
noxibox said:
I wouldn't count on that. House prices in South Africa have tripled in the last ten years. The slump they're referring to in the UK is not likely the undo the bulk of the price growth there. You may catch up if you are not too far behind and can grow your income in the interim before the prices rise again.
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I agree. I've spoken to people who are under the impression, that if the house market crashes or we hit a recession, that they'll be able to buy a house at 100's of thousands rand cheaper than what it is now.
 
Some people have that impression...

All I'm honestly looking for is a small decrease and then a stabilisation of the prices so that they remain relatively static for a few years... it will bring housing within reach of many more people than it is now.
 
House Price growth has stagnated with the increased inflation/cost of living/prime lending rate and in some instances even started to degrade so it's a very real possibilty that you might be able to buy houses for less then their current value if we went into recession.
However not for drastically reduced prices like some wish to believe.
 
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