Lots of bad news in trade deficit decline

While the November 2014 courses on offer trade account figures from the SA Revenue Service (Sars) did contain the good news of a whopping 73.6% decline in the trade deficit, they also told some extremely bad news. The deficit narrowed sharply to R5.7 billion in November, from a revised R21.63bn shortfall in October. But although a major reason was that imports contracted 18.7% to R89.6bn on a monthon- month basis, unfortunately our much-desired export trade also fell 5.3% to R83.9bn. There was more bad news in that, although the November data saw the cumulative gap for the year considerably cut back to R101.1bn, it was still over 38% higher than the R73.2bn over the same period in 2013. But the worst news of all was that the big drop in imports was primarily in merchandise imports which would indicate pessimistic expectations about future industrial prospects. Much of the 18.7% decline was in industrial material and capital goods. The most significant import falls – most of them around or over the 20% area – were: Mineral products imports decreased by R9.38bn (32.9%), equipment components R2.17bn (28.7%), vehicles and transport equipment R1.74bn (18.4%), chemical products R1.75bn (16.4%), and machinery and electronics R1.29bn (5.4%). Luke Doig, senior economist of the Credit Guarantee Insurance Corporation (CGIC), agreed with this presumption, and added some extra bad news of his own. He said that expectations for SA’s trade marketplace, the global economy, were not too optimistic. The World Bank, he told FTW, was itself losing faith. Global economic growth in 2014 was 2.6%, according to the bank. But their previous forecast of 3.4% growth for 2015 had already taken a 12% drop, and their latest prediction had declined to 3.0%. And that stuttering growth forecast for the global economy, he added, all mounted up to a very big challenge for SA. Our main markets for industrial materials – mostly mineral commodities – are not as healthy as was hoped. “There have been enormous falls recently in the price of copper, for example,” Doig said, “and this was immediately accompanied by falls in Anglo American and BHP share prices.” And this, he added, was just one example of where the world economy was going related to SA. INSERT 73.6% The decline in the trade deficit in November 2014. CAPTION The enormous fall in the price of copper is an example of where the world economy is going in relation to SA.