1. Ben Smit 6 November 2002 Prospects for the World & SA economies

2. Outline  Global economic outlook  Domestic economic prospects  Manufacturing sector survey

4. Global economic outlook  Initially unexpectedly strong recovery to 2002 and 9/11 slowdown  Industrial recovery has stalled  US consumer confidence declines again

5. Recovery in the US industrial sector has stalled… Oct 2001 PMI / ISM Sept 2002

6. US consumer confidence weaker … Sept 2002 Michigan survey

7. World economic outlook: the growth numbers (JP Morgan) 200120022003 Real GDP growth USA 0.32.3 (3.0)2.7 (3.3) Euro area 1.40.8 (1.3)1.9 (3.1) Japan -0.3-0.8 (-0.3)0.3 (1.7) Asia excl Japan 3.75.3 (5.4)5.5 (5.8) Latin America 0.2-1.5 (-1.0)0.1 (3.1) Global: developed 0.71.2 (1.7)2.0 (2.9) Global: emerging 2.22.8 (2.8)3.4 (4.7) ( ) = May 2002 forecast

9. 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

10. 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))

11. Consumer sentiment slightly weaker in 2002Q3 Still holding up relatively well FNB/BER Consumer Confidence Index

12. Purchasing Managers Index October 2002

13. South Africa’s inflation trend

14. Current SA conditions: R/$ exchange rate

15. Outlook: Inflation  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

16. Outlook: Economic growth  Stable growth since 1994  Export growth essential  Upswing form 1999 to 2004/5 (?)  Employment growth essential for domestic response Forecast

17. Outlook: the numbers 2001200220032004 Final consumption exp 2.83.02.93.5 Fixed investment3.35.45.27.6 Exports2.41.85.77.3 GDP2.32.73.03.5 CPI5.79.67.43.7 CPIX6.69.67.35.4 Prime Rate (eop)13.0017.315.514.5 R/$ (eop)8.6010.5511.2411.66

19. 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

20. Manufacturing Total Business Confidence Index

21. Domestic sales volumes Expecte d

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

23. Export sales volumes Expecte d

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

25. Current stocks of finished goods

26. Production volumes Expecte d

27. Number of factory workers Expecte d

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

29. Fixed Investment Expecte d

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

31. Western Cape Expected

32. Eastern Cape Expected

33. BUREAU FOR ECONOMIC RESEARCH www.ber.sun.ac.za E-mail: hhman@ber.sun.ac.za