Analysts glum after latest jobs numbers

10 July 2016 - 02:00 By NTSAKISI MASWANGANYI

An increase in job losses and depressed confidence are prompting a revision to South Africa's economic growth forecasts for this year, with some estimating close to zero growth and others even a contraction. The consequences of extremely low economic growth include job losses and more people driven into poverty."Following the data deluge at the end of June revealing broadening strain, this week's data reflected the evidence that the economy has most likely entered into recession," said Carmen Nel, fixed income strategist at Rand Merchant Bank.StatsSA's Quarterly Employment Statistics survey showed this week that the formal sector had lost 15000 jobs.The First National Bank/Bureau for Economic Research's consumer confidence index fell to -11 in the second quarter from -9 in the first. The -11 was even more depressed than the -6 recorded during the recession.The South African Chamber of Commerce and Industry's business confidence index improved in June (95.1) compared with May (91.8), but remained lower than levels recorded in June last year (97.9).The IMF again revised the country's economic growth outlook for this year to just 0.1% from the 0.6% forecast in April.It cited politics and policy deemed harmful to confidence, weak Chinese demand and heightened global financial volatility.The IMF executive board released a report after consultations with labour, business and government stakeholders that are held once a year.HSBC South Africa econo-mist David Faulkner sees an even worse probability: a 0.2% contraction in the economy this year. The downturn in confidence, likely to feed into "anaemic" consumer spending, and a further contraction in fixed capital formation were among the factors Faulkner identified.Laura Papi, mission chief for South Africa and assistant director of the IMF's African department, said that while the risks of a recession were significant , it did not see this to happen for now.The IMF saw economic growth recovering modestly to 1.1% next year. Faulkner expected what he referred to as only the most muted of recoveries in 2017."Important for the markets will be what government does with this weak growth backdrop in the medium-term budget policy statement and how the Reserve Bank reacts to a recession," Nel said.Papi reiterated calls for reforms, particularly in the labour market and education, as these would revive confidence .IMF directors commended the Reserve Bank for "a balanced" monetary policy stance but suggested it "consider holding interest rates steady unless core inflation or inflation expectations rise substantially".Past hikes were still filtering through while the weak economy was keeping inflation contained.The bank's monetary policy committee meets between July 19 and July 21...

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