Cees Bruggemans: Is a Recession only a matter of time?

2009 seems a long way, away, but given today’s poor economic data, murmurings of a recession are bound to be making its way into conversations around the dinner table. And it’s an impressive point to note that South Africa has steered the ship clear of such talk, given countries like Russia, Brazil and let’s not forget the Greeks, have associated themselves with it. In Cees Bruggemans latest piece, he asks the question, why not us? And it’s a nice position to be in at the moment but given the free-falling rand, commodity prices tanking and a power situation that isn’t improving, well not in the next 2 years, the writing may be on the wall. – Stuart Lowman

by Cees Bruggemans*

Election results. One of South Africa's sharpest economists, Cees Bruggemans, explores what is next for markets, interest rates and business conditions.

Greeks do it. Brazilians do it, Venezuelans and Argentinians are doing it all the time (and all of them warm-blooded). Russians do it, too (cold-blooded fish mostly, thinking their leadership).

They all are mired in unpleasant, prolonged recessions.

So why not ever us?

We are a commodity producer (like Brazil and Russia). We are devastating our tourism (like Greece?). We are having a sham government (like Venezuela and Argentine). We are warm- and cold-blooded in equal measure, too, depending on need.

We should qualify for a recession.

Certainly agriculture, motor trade, non-residential building trade, the wholesale trade, tourism and probably manufacturing (courtesy of the odd oil refinery or steel plant going out of the line) are there already, too.

So why not the whole private sector, with only the public sector marching on (admittedly on fumes, from increased VAT next year, encouraged by the Davis Tax Committee as the least of all evils)?

It is rather complicated.

We keep on producing too much, and earning too much income and spending it to qualify for recession. This is strange, given our bombed out confidence among businesses (political trepidations) and households (job insecurity steadily rising), both holding back on big commitments, with credit data showing our remarkable tightfistedness (or credit starvation diet, something completely different). And the government holding back purely because having run out of investment resources (having spent money elsewhere on too many nothings), yet still struggling on.

We could, however, find other marginal sector bits sliding negative, too. Mining, for instance, on the brink of coal and gold strikes. That should put them under for a while (and push bits of manufacturing, transport and other stuff under anew, too).

Retail still looks resilient, if very modest now, essentially going sideways for the past three months, and some recent retailer results not too hot. Massmart for instance, but also like-for-like Shoprite SA store sales volume growth (negative?). Makes you think they too are on the brink of things, staring in some kind of abyss though saved by new store openings as consumer locational preferences keep shifting dynamically. And of course Africa. As so many others.

Are we in recession?

Officially not. Too many subsectors still positive, if only just. SARB is keeper of those seals, arbiter of the recession designation. So far the 2009 upswing has not ended yet, though every SARB quarterly bulletin can bring us the word on a few simple data revisions, showing up the obvious.

We do feel like a ship going down, and not only because of parliamentary antics. Yet there has been no great shock to the economy yet, causing generalised pullback and giving us recession. But the world is working on it, China especially. Shocking markets, causing reverberations, inviting fearful responses.

A matter of time?

But then again we do have a way of muddling on, not just politically, working harder, less free play time, more gravitas, noses to grindstones, lots of dull jacks, but no alternative, really. And so we stay afloat. Generating output, income, just enough to keep advancing (for now) even if seemingly our hearts are not into it.

A nation of many survivors. Something for those mired in recession to copy (if not laid low by factors outside their control).

*Cees Bruggemans is consulting economist at Bruggemans & Associates