‘Expect demand to firm at end of first quarter next year’

All the indicators of the state of health of the SA economy are beginning to look encouraging, but how long between the signs being right and cargo volumes and money beginning to flow into the freight industry? The first signal that raised a glass or two in celebration was the SA Reserve Bank (SARB) composite lead indicator – which indicated that SA’s economic recovery remained on track. The index, which signals growth 6 to 12 months down the line, rose for the sixth month in a row to 114.6 in September from a trough of 105.3 in March. This was soon followed by more good news – as the revised and re-based gross domestic product (GDP) statistics revealed that the economy had exited the first recession in 17 years in the third quarter. It advanced by 0.9% quarter-on-quarter and followed three consecutive quarters of contraction – bringing the year-to-date growth in the economy to -1.8%. Next up from the SARB was the announcement of the inflation rate, and it equally raised a few “cheers”. The inflation measure, the consumer price index (CPI), dropped to 5.9% in October from 6.1% in September – the first inflation target-friendly reading since March 2007. This was soon followed by one of the driving factors behind CPI movement, the producer price index (PPI) – with producer inflation easing slowly back to still-negative growth of -3.3% in October from -3.7% in September. A trend that economists in general think will persist for the rest of this year and into early next. So the signs are looking a bit better, but when will this result in an upturn in cargo volumes for users and members of the freight industry? Speak to Luke Doig, senior economist for investment and economic services at Credit Guarantee Insurance Corporation (CGIC), and he’ll tell you that he doesn’t see volumes firming very much in the remaining days of 2009. “We’ll probably only see firm demand towards the end of the first quarter of next year.” But there’s “no doubt we’ve turned the corner”, he added, reminding us that he’d predicted back in July that an upturn in the fourth quarter – as expressed to FTW by optimistic soothsayers in the industry – was a “definite possibility”. Although slightly more cautious about the “when”, Andre Erasmus, senior manager of finance and trade consultants, Deloitte, agreed with the imminence of an upturn. “If you look at things like the exchange rate and interest rates, they’re where you’d usually expect them to be before we see growth,” he told FTW. “We’ll definitely see an upturn next year, certainly from the time of the World Cup (June, 2010) if not before.” Duncan Bonnett, partner in trade consultancy Whitehouse & Associates, has some reservations. “Asia is already picking up, with the demand for commodities, for example, increasing,” he said. “So it’s already starting there.” But in more global terms, things are not quite so bright. “If you look at the US, their recent economic data is still a bit weak,” said Bonnett, “and that’s only expected to recover into next year. “So it’s hard to say what the SA lag time will be.” Also a bit of a yes and no about the upturn amongst our forwarding industry commentators. As far as Roland Raath, MD of clearing and forwarding agents Cargocare Freight Services is concerned, his worries about the downturn have been minimal. “We’ve had a good year,” he said, “and this has been an extra-good month. So we’ve been somewhat insulated. “But anyone who’s getting excited is going to have to watch. There could be a bit of pre-Christmas enthusiasm, but this may fade later. “This November/December were surprisingly active, so we can hope that this will continue.” Meantime, Eric Gower- Winter, MD of Barloworld Logistics, is a bit more pessimistic in his crystal-ball gazing. “We see 2010 as a fairly flat year,” he told FTW, “and expect that things will only start to pick up a bit in 2011. “But one thing’s for sure. The heydays of the past will not happen again.” Perishables haven’t been so sensitive to the downturn either, according to Mike Froy, MD of perishable export specialists, Grindrod PCA. “I must be perfectly honest,” he said. “We have not been as badly hit as the general market.” An advantage for perishables, he added, is that they are low-priced commodities, so are less affected by a consumer cash shortage, and there is less lead time between the signs being right, and a recovery in off-take. It’s an essentially more gloomy forecast from Carol Graham, SA marketing manager of the giant carcarrier, Hoëgh Autoliner. In their big ships, shipping lines have a massive capital investment looking for a return, and extremely large operating costs. It takes some time for any increase to start having a beneficial effect on their bottom lines. “It’s probably going to be 6 to 12 months before we start seeing the benefits,” she told FTW.