Ben Smit6 November

2002

Prospects for the World & SA economies

Outline

Global economic outlook

Domestic economic prospects

Manufacturing sector survey

Global economic outlook

Initially unexpectedly strong recovery to 2002 and 9/11 slowdown

Industrial recovery has stalled

US consumer confidence declines again

Recovery in the US industrial sector has stalled…

35

40

45

50

55

60

Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

Oct 2001

PMI / ISM

Sept 2002

US consumer confidence weaker …

60

80

100

120

Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02

Sept 2002

Michigan survey

World economic outlook: the growth numbers (JP Morgan)

2001 2002 2003Real GDP growth

USA 0.3 2.3 (3.0)

2.7 (3.3)

Euro area 1.4 0.8 (1.3)

1.9 (3.1)

Japan -0.3 -0.8 (-0.3)

0.3 (1.7)

Asia excl Japan 3.7 5.3 (5.4)

5.5 (5.8)

Latin America 0.2 -1.5 (-1.0)

0.1 (3.1)

Global: developed

0.7 1.2 (1.7)

2.0 (2.9)

Global: emerging

2.2 2.8 (2.8)

3.4 (4.7)

( ) = May 2002 forecast

Recent SA developments

Growth slowed in 2001 (from 3.4% 2.2%) but economy proved resilient

Real sector activity surprisingly strong in Q3

Exchange rate relatively stable around R10.50/$

Inflation rates keep surprising

400 basis point interest rate increase

RMB/BER Business Confidence Index

0

20

40

60

80

100

1986 1988 1990 1992 1994 1996 1998 2000 2002

Recent SA developments(continued)

•From 68 in 02Q2 to 68 in 02Q3

•Manufacturing (69 (69))

•Building (45 (42))

•New vehicles (54 (67))

•Retail (69 (69))

•Wholesale (89 (91))

-50

-25

0

25

50

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02

• Consumer sentiment slightly weaker in 2002Q3

• Still holding up relatively well

FNB/BER Consumer Confidence Index

Purchasing Managers Index

INVESTEC PMI

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-02 Jan-02 May-02 Sep-02

qoq

% ch

ange

45

50

55

60

65

index

Man GDP qoq% Investec PMI SA

October 2002

South Africa’s inflation trend

0

5

10

15

20

25

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03

% ch

ange

on

prev

ious

per

iod

CPI PPI

Current SA conditions:R/$ exchange rate

Rand/$ Exchange Rate: Valuation

-60

-40

-20

0

20

40

60

Jan-70 Jan-74 Jan-78 Jan-82 Jan-86 Jan-90 Jan-94 Jan-98 Jan-02

unde

r(-)

/ ov

er(+

)

Outlook: Inflation

2

4

6

8

10

12

14

16

90 92 94 96 98 00 02 04

PPI CPI

Current 11.8 (CPIX), 12.5 (CPI), 15.4 (PPI)

Exchange rate impact to pass

Food prices Longer term anchors

– International competition & low world inflation

– Conservative fiscal policy– Inflation targeting

Forecast

Outlook: Economic growth

-3

-2

-1

0

1

2

3

4

5

90 92 94 96 98 00 02 04

GDP real growth

Stable growth since 1994

Export growth essential

Upswing form 1999 to 2004/5 (?)

Employment growth essential for domestic response

Forecast

Outlook: the numbers

2001 2002 2003 2004Final consumption exp 2.8 3.0 2.9 3.5

Fixed investment 3.3 5.4 5.2 7.6Exports 2.4 1.8 5.7 7.3GDP 2.3 2.7 3.0 3.5CPI 5.7 9.6 7.4 3.7CPIX 6.6 9.6 7.3 5.4Prime Rate (eop) 13.00 17.3 15.5 14.5R/$ (eop) 8.60 10.55 11.24 11.66

Highlights:Third quarter 2002

Confidence remains at a high level Solid increase in domestic sales, better

than expected Export sales edge higher Decline in stock levels Small rise in employment, first in 7 years Rise in actual fixed investment and

intentions

0

10

20

30

40

50

60

70

80

90

100

1985 1987 1989 1991 1993 1995 1997 1999 2001

Manufacturing TotalBusiness Confidence Index

-60

-40

-20

0

20

40

60

97 98 99 00 01 02

Domestic sales volumes

Expected

Domestic sales volumes(BER survey: 02Q3 compared to 01Q3)

-40 -20 0 20 40 60 80 100

FURNITURE

FOOTWEAR

TRANSPORT EQP

PRINTING

RUBBER

CHEMICALS

PLASTIC

MACHINERY

METALPRODUCTS

PAPER

TOTAL

ELEC. MACHINERY

CLOTHING

NON-METAL MIN

TEXTILES

BASIC METALS

FOOD

WOOD

BEVERAGES

Export sales volumes

-30

-20

-10

0

10

20

30

40

50

97 98 99 00 01 02

Expected

Export sales volumes(BER survey: 02Q3 compared to 01Q3)

-40 -20 0 20 40 60 80 100

PRINTING

FOOTWEAR

VEHICLES

CHEMICALS

ELEC. MACH

METALPROD

MACHINERY

TOTAL

FOOD

TEXTILES

BASIC METALS

BEVERAGES

PAPER

PLASTIC

FURNITURE

NON-MET MIN

CLOTHING

WOOD

RUBBER

Current stocks of finished goods

-10

0

10

20

30

40

50

60

97 98 99 00 01 02

Production volumes

-40

-30

-20

-10

0

10

20

30

40

50

60

97 98 99 00 01 02

Expected

Number of factory workers

-70

-60

-50

-40

-30

-20

-10

0

10

97 98 99 00 01 02

Expected

Number of factory workers(BER survey: 02Q3 compared to 01Q3)

-100 -80 -60 -40 -20 0 20 40 60

FOOTWEAR

PRINTING

VEHICLES

FOOD

PAPER

METALPROD

ELEC. MACH

BEVERAGES

CHEMICALS

RUBBER

TOTAL

BASIC METALS

FURNITURE

MACHINERY

TEXTILES

PLASTIC

NON-MET MIN

WOOD

CLOTHING

Fixed Investment

-20

-10

0

10

20

30

40

97 98 99 00 01 02

Expected

Real fixed investment: 2002Q3(machinery & equipment: 12 month outlook)

-40 -20 0 20 40 60 80

BEVERAGES

FOOTWEAR

CLOTHING

RUBBER

FOOD

PRINTING

ELEC. MACHINERY

WOOD

MACHINERY

NON-METAL MIN

TOTAL

PLASTIC

METALPRODUCTS

FURNITURE

TRANSPORT EQP

PAPER

CHEMICALS

BASIC METALS

TEXTILES

Western Cape

Domestic sales & export sales

-60-40-20

020406080

M-98 M-99 M-00 M-01 M-02-40

-20

0

20

40

60

80

Domestic sales Export sales

Expected

Business Confidence

0

20

40

60

80

100

96 97 98 99 00 01 02

Eastern Cape

Domestic sales & export sales

-80-60-40-20

020406080

M-98 M-99 M-00 M-01 M-02-60-40-20020406080

Domestic sales Export sales

Expected

Business Confidence

0

20

40

60

80

100

96 97 98 99 00 01 02

BUREAU FOR ECONOMIC RESEARCH

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