By Cees Bruggemans, Chief Economist FNB.

After a great fall (2008), success in arresting the fall and stabilizing the economy on a low level of capacity utilization (2009), growth prospects tend to be very promising as slack resources as well as new inputs will be available to be put to work. Demand needs to grow in order to put such available resources to work.

Potentially this will be so for years to come (2010-2020) as any new supply imbalances eventually ending the next growth expansion (balance of payments, inflation) could remain manageable for the time being.

This, in a nutshell, is the case for growth.

It then gets better, but it also gets worse. For the global environment looks even better than this simple base case, offering piggyback opportunities for small open economies like ourselves.

This very favourable global environment, however, may also prove to offer a too rich

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By Cees Bruggemans, Chief Economist FNB.

The SARB leading indicator peaked at 127.2 in March 2007, thereafter declining for two years, initially gradually during 2007 but acquiring freefall proportions in 2008.

This indicator hit a cyclical low of 105.3 in March 2009, thereafter rising very rapidly to 112.5 by August 2009.

Given the events of 2008 and early 2009, there presumably exists no surprise regarding the indicator’s freefall in 2008. But what has made it rise so phoenix-like rapidly since March this year?

As per the June 2007 issue of the SARB Quarterly Bulletin, this leading index today is a composite of twelve individual time series which together offer superior forward-looking ability regarding the South African business cycle, leading turning points by some six to nine months.

The twelve time series can be grouped in four distinct sub-categories, each making a peculiar contribution to the behaviour of the composite

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By Cees Bruggemans, Chief Economist FNB

Evidence continues mounting that our economy has turned the corner in tandem with most overseas countries, if at a slower speed.

Our stock market has marched closely in lockstep with global markets, reaching its cyclical low last November, and revisiting this level last March, after which a 40% rise followed (less vigorous than elsewhere).

Our non-gold mining output reached its cyclical low in January 2009, electricity output bottomed in February, manufacturing output did so in April, all thereafter in a rising trend.

Nominal house prices appear to be rising from July and passenger car sales (per trading day) seem to be rising from August. Our exports as denominated in Dollars bottomed in January, thereafter also rising.

So recovery has been with us for some time, even if opinion surveys and other leading indicators took their time confirming this.

The SARB leading indicator reached

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By Cees Bruggemans, Chief Economist FNB

When having to make a binary decision (yes/no, whether or not to change interest rates) one is apparently well advised to, firstly, stick to the facts and, secondly, to keep things simple.

Keeping things simple preordains a view on basically two dimensions, namely the inflation forecast and the chances of getting this right, and the state of the economy (whether it is over- or underperforming).

Incidentally, these two dimensions coincide with the inflation gap and output gap dynamics of the Taylor Rule, but with somewhat different reasoning.

First, the inflation outlook. There seems to be consensus that after halving from 13.5% to 6.7% over the past year, CPI inflation has a bit more sliding to do over the coming year, reaching 5% territory in 2H2010.

That’s the good news, but it is incomplete. We want to know the chances (risk) of actually seeing

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China has positioned itself as the world’s largest auto market, surpassing the U.S. with sales surging 36.5% year-over-year to 1.14 million units in June 2009. According to the China Association of Automobile Manufacturers, passenger car sales in China were 872,900 vehicles in June, 2009 whereas passenger car sales in the US for the same period were 859,847 units.

According to the Associated Press (AP), China’s total vehicle sales were up 17.7% to 6.1 million vehicles during the first half of 2009. China has overtaken US auto sales for five of the past six months. The U.S. market temporarily took the lead in May 2009 only to drop again the following month.

Stimulus package including lower sales tax, subsidies to trade in older cars and other incentives provided by the government has helped sales in China. According to the AP, the government of China has reduced retail sales tax on small cars by

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By Cees Bruggemans

After massive shocks savaged the economy last year, by 4Q2008 (really already 3Q2008) putting us into recession, the only question basically mattering now is whether there are yet more of these massive shocks to be absorbed shortly. For if we are, we will remain probably repressed, recessed if not depressed for much longer.

But short of a large meteorite striking the southern oceans, and wiping out our living space, I am having little success identifying the rogues that will do us in.

Perhaps I am not looking hard enough?

For could the global banking system still encounter a relapse, with another big bankruptcy, fragile nerves failing once more spectacularly, yet with global policymakers by now having shot away all their ammunitions, their cupboards bare of the means to address yet more catastrophic failures?

Then again, have global policymakers already overreached themselves, burdening their national finances and

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China and India (CHINDIA) established themselves as automobile market leaders by posting a staggering 36.5% and 14% growth, respectively, in auto sales during June. Government incentives such as sales tax and interest rate cuts as well as subsidies to trade in older cars are the principal factors behind the growth.

Passenger car sales in China totaled 872,900 units, outpacing the U.S. by 13,053 units during June.

Passenger car sales in India were up 8% during the month, a significant improvement from a 4% decrease in May. Apart from Government incentives, new models such as Maruti Suzuki Ritz, Honda Jazz and Fiat Grande Punto pushed sales growth in the country.

The results will surely attract global automakers toward these countries to drive revenues in a gloomy auto industry.

During June, the U.S. auto industry posted a sales decline of 28%. Industry sales fell short of the targeted annual rate of 10 million units by 310,000

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Gold firmed today, Thursday, as weakness in the dollar prompted interest in the precious metal as a currency hedge, with some physical demand after the previous session’s fall also supported prices.

Spot gold was bid at $912.50 an ounce at 1417 GMT, against $908.45 an ounce late in New York on Wednesday. U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange rose $3.50 to $912.80 an ounce.

Gold sold off on Wednesday in line with other commodities, slipping to an eight-week low, after the U.S. Commodity Futures Trading Commission said it was considering a clampdown on excessive speculation in commodities.

Afshin Nabavi, head of trading at MKS Finance in Geneva, said the slip was met with some light physical buying in the Far East and Europe.

“We saw some small demand out of the Far East this morning,” he said. “But India and the Middle East is still very

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by Edward Hugh: Barcelonabr /br /br /blockquote"For what it’s worth, a key conclusion from the IMF’s new World Economic Outlook is that recessions caused by financial crisis typically end with export booms, with the trade balance improving,on average, by more than 3 percent of GDP. I find this a disturbing result: we’re now suffering from a global financial crisis, which means that the usual driver of recovery will only be available if we can find another planet to export to."br /a href="http://krugman.blogs.nytimes.com/2009/04/27/japans-recovery-again/"Paul Krugman /abr /br //blockquoteblockquoteWith results still coming in, projections show the United Progressive Alliance is likely to win about 250 seats, making it a shoo-in to form the next government and provide continuity, a stable administration and progress on key economic and corporate reforms.br /a href="http://online.wsj.com/article/SB124247401653426893.html"Wall Street Journal/a, May 16 2009/blockquotebr /blockquotePrime Minister Manmohan Singh’s electoral victory, the biggest any Indian politician has scored in two decades, may ...

It will be interesting to see if this is the start of a trend or an Olympic induced anomaly. We won't know until a month from now but this is getting a lot of "attention" as a "signal" that China is slowing severely. Maybe it is. Maybe it isn't. But it really doesn't matter - if enough hot money believes it is, than it is. Even if it isn't. Perception is reality. China's passenger-car sales fell in August for the first time in more than three years as the Beijing Olympics and a slumping stock market prompted drivers to delay purchases. Sales of passenger cars, sport-utility vehicles and multipurpose vehicles totaled 451,300, the China Association of Automobile Manufacturers said in an e-mailed statement today. Demand for cars in the world's second-largest vehicle market cooled as ...