The last week provided some mixed economic data, says Elaine Wilson, research and strategic planning manager for JHI.
Some of the data released included a 1 percent cut in the prime lending rate to 13 percent; CPI increased to 8.6 percent year-on-year, up from the 8.1 percent in January; PPI contracting to 7.3 percent year-on-year in February from January’s 9.2 percent; a 70 percent increase in the number of liquidations; and a 38.8 percent increase in the total number of insolvencies recorded for January 2009.
“The reduction in the interest rate was good news for consumers because it meant more money in their pockets.
“This should be encouraging for the retail sector. However, the announcement of the CPI figure put a damper on this as retailers are battling to adjust prices lower in light of the continuous growth in their purchasing prices. The PPI figures were driven by, in particular, declining agricultural and manufacturing food prices. The lower PPI figure is strengthening the case for further cuts in the interest rate despite rising inflation and the volatility of the rand,” she said.
“It should be noted that the next MPC meeting is one day after the release of the first quarter GDP figures, which may influence the interest rate decisions because it is expected that the country will enter a period of recession.
“However, the effect of the interest rate cuts on property market will been seen only towards the end of the year as people and companies are still adjusting from a period of high inflation and interest rates,” Wilson said.
“One of the biggest concerns for 2009 is increased company and close corporation liquidations. The effect of liquidations is starting to have a negative effect on the commercial rental market, with increased defaulting tenants and rising vacancies,” she said.