Tag: Money Supply

The state of the SA economy: Moving forward but not picking up speed

We have updated our Hard Number Index (HNI) of the state of the SA economy to March 2011. The HNI combines two very up-to-date hard numbers, unit vehicle sales and the note issue of the Reserve Bank adjusted for Consumer Prices to form a business cycle indicator.

The HNI continued to move higher in March, though the speed at which the economy is moving forward (the rate of change of the HNI itself) has probably stabilised and may well slow down. We also compare the HNI with the Co-Inciding Business Cycle Indicator of the Reserve Bank that is only updated to January 2011. The turning points of the two Indexes are well aligned making the HNI a good and up to date leading indicator of the current state of the economy.

Read the rest of the story in Daily Ideas in today’s Daily View: The state of the SA economy: Moving forward but not picking up speed

Hard Number Index: Maintaining speed

The February 2011 reports on new unit vehicle sales and the Reserve Bank note issue have been released and we are able to update our Hard Number Index (HNI) of the current state of the SA economy. As may be seen below, the economy continued to pick up momentum in February 2011.
 
The very up to date HNI is proving a reliable leading indicator of both the Coinciding Business Cycle Indicator of the Reserve Bank (updated to November 2010) and the Reserve Bank Leading Indicator of the SA Business cycle (updated to December 2010).  
  Continue reading Hard Number Index: Maintaining speed

Money and credit: Sill growing too slowly for GDP and employment growth

The money and credit statistics released by the Reserve Bank yesterday indicate that while the money supply (broadly measured as M3) is maintaining a satisfactory rate of growth of around 7% per annum on a quarter to quarter basis, credit extended by the banks to the private sector has remained largely unchanged over the past quarter. Not coincidentally, the price of the average home in SA is also largely unchanged over the past year.

It will take an increase in mortgage credit to lift house prices, while it will take an improved housing market to encourage the banks to lend more and for property developers to wish to borrow more. The trends in money and credit supply indicate that short term interest rates are still too high rather than too low to assist the economy to realise its potential output growth. And so policy set interest rates are unlikely to increase any time soon.

The lower level of mortgage interest rates and a significantly lower debt service ratio for the average SA household  (See below) still have work to do to revive the housing market and construction activity linked to higher house prices. Perhaps the authorities, now so concerned with employment growth in SA and intending to subsidise employment with tax concessions, should be reminded that house building and renovations are highly labour intensive.

For graphs and tables, read the full Daily View here: Money and credit: Sill growing too slowly for GDP and employment growth

The Hard Number Index: Recovery remains well on course

The Reserve Bank announced its note issue for January this morning. This enables us to complete our Hard Number Index (HNI) of the immediate state of the SA economy. Our HNI combines unit vehicle sales with the note issue (adjusted for inflation in equal weights) to provide a very up to date indicator. We compare trends in the HNI with the Reserve Bank coinciding indicator of the state of the business cycle, although this has only been updated to October 2010. Three months can be a very long time in economic life. Continue reading The Hard Number Index: Recovery remains well on course