BRIEF ANALYSIS

So the news that CPI inflation slowed down in June to 5,7% from 6,1% has excited many. The silent prayer that the SARB may drop the repo rate from 5,5% to 5% is deafening. Perhaps a slowdown in inflation is good for preserving the buying power of our money especially for the poor whose livelihoods are disproportionately impaired by runaway inflation.

But hidden in the numbers are deadly telltale signs that the economy may be coming off the boil. For example, leading indicators such as retail sales and business confidence indices point to a lulled macro environment. A slowdown in business confidence and/or activity bodes ill for the economy in general, but job creation in particular.

Buoyancy in economic activity is key to the creation of jobs, if employers believe that output is above supportive levels of demand, it'll trigger a whole new cycle of deleveraging and inventory reductions. This means no investment and thus no new jobs.

The counter argument is that lower inflation will lead to lower interest rates and as such higher investment and more jobs. Unfortunately, the evidence suggests otherwise. For example, the current account deficit widened to 4.9% from 3.6% on a quarter to quarter basis. This suggests higher net cash outflows from portfolio investments and perhaps higher net imports. Both don't augur very well for the country as they suggest both capital flight and a failure in domestic factor markets.

Furthermore, global crude prices have been moderating for a few months now and are currently below US$80 a barrel (an eight month low). This suggests a poor global economic outlook and lower economic activity in significant parts of the world (US, Europe and China). South Africans may be paying 55c/litre less at the pumps, but evidence suggests that there may be fewer of them visiting the pumps.

Sadly, the jobs outlook remains desperately negative. There's no sign that an economic miracle is on the cards in the near term to raise hopes or prospects of higher employment levels.