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The pain is spreading

I was on the phone to a friend in South Africa last night who works in the construction industry. He told me that sales made by his company were down 25% this year, and they were giving up any wage increases in order to save jobs. This was backed up by the news released yesterday that the South African economy has gone into recession for the first time since 1992. This follows two consecutive quarters of economic downturn. In the final three months of 2008 the economy contracted at a year-on-year rate of 1.8%, but this was followed by a fall in GDP of 6.4% in the first quarter of 2009 on an annualised basis.

 

Interest rates have been reduced from 12% in December to 8.5% currently, although it is expected that they will be reduced further today by the Reserve Bank of South Africa. The biggest downturns have been in mining and manufacturing and there has been a positive impact on construction in some regions due to the capital spending on the World Cup tournament which comes to South Africa next year. The government expects another quarter of negative growth before the economy picks up again.

 

 

 

Also, yesterday, it was reported that the Russian economy fell by 10.5% in April compared to the same month last year. Russia has been particularly hit by the halving in the price of oil, which is one of its major exports, as well as a general slowdown in industrial output.

 

Finally, in the US, it was announced that house prices fell by a record 19.1% in the first quarter of this year. One national index shows that home prices have fallen by 32.2% since their peak in the second quarter of 2006.

 

The only good news I can find at the moment is that Japan has experienced a trade surplus for the past three months, although this has largely been due to import values falling even faster than exports. Having said that, the rate of fall in exports is now declining and there is a cautious optimism that the worst is over.

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Posted in GDP, Housing, Japan, recession, US economy

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