Picture: ISTOCK
Picture: ISTOCK

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A KEY Reserve Bank index out on Tuesday confirmed what many economists had already warned — that SA’s economic growth prospects this year are dim.

The highly regarded leading indicator fell slightly, but has remained at a level that shows a stagnating economy.

It is composite and forward-looking, so offers pointers to the economy’s performance for the next six months.

The indicator declined 0.6% to 92.2 points in January from 92.8 in December last year. But compared to a year ago, it deteriorated 4% after a 3.8% year-on-year contraction in December.

A slowdown in commodity prices and building plans was mainly responsible for the contraction.

This rate of decline points to economic weakness and deterioration in new residential mortgage lending in the near term, FNB household and property sector strategist John Loos said.

The Reserve Bank last week again revised down its economic growth forecast for this year to 0.8% from 0.9%, while the Treasury last month cut its projection to 0.9% from 1.7%. The economy grew 1.3% last year.

Anaemic growth means lower investments and job creation suffers as a consequence.

On a monthly basis, six of the 10 economic indicators used to compile the index decreased; one remained unchanged; and three increased.

Job advertisements were also in the negative and expected to remain so for most of this year. Jobs were expected to stay negative over much of this year as a result of four years of economic slowdown, Mr Loos said. The largest positive contribution was from an acceleration in the six-month smoothed growth rate in the real M1 money supply, followed by an acceleration in the 12-month percentage change in the number of new passenger vehicles sold.

Slow economic growth has been flagged as a risk to SA’s sovereign credit rating. Last week, Moody’s was in SA to assess plans for the economy. A downgrade by Moody’s will bring its rating in line with that of Fitch and Standard & Poor’s — a notch above junk.