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