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    Many more people are going bankrupt

    Debt summonses soared in February while wholesale trade plunged a record 8.9%, adding to the raft of dismal economic data seen so far this year.

    Sound regulations have helped the financial sector, the economy's biggest, to shrug off the global credit crisis. But bad debts are creeping up as households buckle under high debt costs and falling disposable income.

    At the same time more companies are starting to fold, as output plunges in SA's retail and manufacturing sectors — which together comprise nearly a third of the economy's output.

    Wholesale trade fell 8.9% in February compared with the same month last year, the steepest since the latest records began in 2003.

    That followed a drop of 3.8% in January, also at constant prices, which are adjusted to account for inflation. In nominal terms they fell 2.3%, the first unadjusted drop on record.

    “Wholesale trade outperformed its retail counterpart during 2007 and 2008, but this trend reversed during January this year,” said Fanie Joubert, an economist at Efficient Research.

    “What is evident is that both wholesale and retail trade sales are cooling as demand in the economy remains dampened,” he said.

    Retail sales plunged 4.5% in the same month, which was also a record. Food, beverages and tobacco and machinery, equipment and supplies were the only wholesale industries to clock up significant growth last month.

    Lower fuel and metal prices led to steep falls in those industries while construction and other building materials dived 17%, the data showed.

    Other figures yesterday showed summonses issued for debt climbed 14.4% in February compared with the same month last year. In the three months to end-February they rose 15.4%. That suggests personal bankruptcies kept rising that month after a 40% jump in January.

    Household debt as a ratio of disposable income declined from a record 78.5% in the first quarter of last year, but debt costs are still at decade highs, above 11% of disposable income.

    Most analysts believe SA's economy has contracted for the second quarter running, which means it is technically in recession.

    But ETM managing director George Glynos is more upbeat, with a forecast that a recovery in the second half of this year will lead to growth in overall output. “I think 2009 will be a turnaround year. We see quantifiable signs of an improvement in a number of sectors starting with the consumer.”

    Interest rates have fallen 2.5 percentage points since December, and further cuts are expected.

    Source: Business Day

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