Emerging Market Commodities producers face similar problems.. Here they are explained with few chart Emerging Market Commodities producers face similar problems.. Here they are explained with few charts using South Africa as an Example (This comes from seekingalpha.com). 2008 crisis is really at the root of the problem. Stimulus-driven growth was very short-lived, as evidenced by negative wage growth and real GDP growth trending lower since 2010 (Chart 1).
With inflation moving higher and a growing budget deficit forcing South Africa to take on more debt, the government's fiscal and monetary stimulus options are limited (Chart 2).
The drop in global commodity prices is a net negative for commodity producers and SA as an example given the country's natural resource base and its large mining sector.
Like in may GEM commodities producers from 2003 to 2008, household debt-to-disposable income levels jumped from 53% to 83% (Chart 3).
This additional borrowing was mainly used to subsidize incomes, allowing consumers to spend significantly more than they earned over the past decade Chart 4
Absent savings, consumer spending in South Africa has been supported mainly by credit growth, especially in the low-income segment. Unsecured lending, is now most closely aligned with consumer credit issues, has ballooned, growing over 400% since 2008. Credit problems are starting to surface - today.
close to half of credit-active consumers are impaired, with only 42% of accounts classified as current (Chart 5). Bottom line is that GEM commodities producers retailers are at risk.
Emerging Market Commodities producers face similar problems.. Here they are explained with few charts using South Africa as an Example (This comes from seekingalpha.com). 2008 crisis is really at the root of the problem. Stimulus-driven growth was very short-lived, as evidenced by negative wage growth and real GDP growth trending lower since 2010 (Chart 1).
With inflation moving higher and a growing budget deficit forcing South Africa to take on more debt, the government's fiscal and monetary stimulus options are limited (Chart 2).
The drop in global commodity prices is a net negative for commodity producers and SA as an example given the country's natural resource base and its large mining sector.
Like in may GEM commodities producers from 2003 to 2008, household debt-to-disposable income levels jumped from 53% to 83% (Chart 3).
This additional borrowing was mainly used to subsidize incomes, allowing consumers to spend significantly more than they earned over the past decade Chart 4
Absent savings, consumer spending in South Africa has been supported mainly by credit growth, especially in the low-income segment. Unsecured lending, is now most closely aligned with consumer credit issues, has ballooned, growing over 400% since 2008. Credit problems are starting to surface - today.
close to half of credit-active consumers are impaired, with only 42% of accounts classified as current (Chart 5). Bottom line is that GEM commodities producers retailers are at risk.
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