A dispatch from the economic front: vehicle sales and supplies of cash are picking up momentum
Sales of new vehicles by SA dealers in January 2015 some 52306 units of all sizes were good enough to keep the new vehicle sales cycle on a recovery path that began in mid year. If recent trends are sustained, the network is on track to sell over 700 000 new units in 2015, close to the record levels achieved in 2006.
We combine this statistic with another very up to date hard number, notes issued by the Reserve Bank in January 2015, to establish our Hard Number Index (HNI) of the state of the economy. The HNI for January 2015 indicates that economic activity in SA continues to grow at a modest pace.
Furthermore the pace of activity that appeared to be slowing down in mid-year has gained some momentum and is forecast to sustain this rate of growth in 2015. The HNI may be compared to the coinciding business cycle indicator of the SA Reserve Bank. This economic activity indicator, based on a much larger set of mostly sample surveys (not actual hard numbers) is also pointing higher, suggesting a pickup in growth rates, but is only updated to October 2014. It should be noted that the turning points of the HNI and the Reserve Bank indicator were very well synchronised when the economy first began to recover from the post Global Financial Crisis recession, in 2009.
In the figure below we track the two separate growth cycles, unit vehicle sales and demands and supplies of real cash – the note issue – deflated by the CPI. Both series are pointing higher. This upward momentum will be sustained by less inflation to come and the relief lower rates of inflation provide for interest rates. The lower inflation might, in due course, possibly only in 2016, mean lower (not higher) costs of financing vehicles and will help the vehicle market and the economy generally.
