Category Archives: Economic Research

Economic Research

Vehicle Sales – June 2015

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A total of 1,845 new vehicles were sold in Namibia during June. New vehicle sales fell by 8.8% year on year, although this is due to the high base set last year. On a year to date basis new vehicle sales grew by 4.6% to 11,003, therefore still on track for a record year. The 12 month cumulative measure of new vehicles sold fell for a second month, down from 22,611 in May to 22,434 in June, largely due to the high base set in June 2014.

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Passenger vehicle sales rebounded 23.1% on a month on month basis after falling 15.4% last month. On a year to date basis sales of new passenger vehicles rose 3.7% to 4,986 vehicles sold, the highest figure on record. Year on year sales of new passenger vehicles grew by 1.5%, up from -3.8% last month. A total of 906 new passenger vehicles were sold during June, four vehicles short of the highest figure on record.

On a month on month basis new commercial vehicle sales rebounded 8.3% with a total of 939 vehicles driving off the showroom floors. The total number of new commercial vehicles sold for the year has increased by 5.3% to 6,017, on track for a record year. Sales of new light commercial vehicles jumped 9.4% month on month, although dropping 15% year on year, due to a high base in June last year. Sales of medium commercial vehicles rose by 20% over last month while sales of heavy commercial vehicles fell by 10.5% on a month on month basis. Both these metrics are on track for record sales on a yearly basis with record year to date figures.

Veh Jun2The Bottom Line

Current year to date vehicle sales are at record levels for all classes measured. This is a sign of positive consumer sentiment and indicative of a growing economy. A strong consumer base supported by expansionary fiscal policy and real wage growth should see the growth trend continue, although at a slower pace due to an elevated base set last year.

Building Plans – June 2015

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A total of 185 building plans to the value of N$167 million were approved by the City of Windhoek in June 2015. On a year to date basis 1,317 plans were approved with a value of N$1,104.8 million versus 1,361 plans valued at N$1,345.9 million for the same period last year. On a year to date basis the value of plans approved is down 17.9% although recovered during May. This year to date decrease in value of plans approved is mostly due base effects as three large commercial projects were approved by the municipality in February 2014. On a month to date basis the value of plans approved is down 54.3%. The large decrease in the value of total plans approved during the month is attributed to the value of additions to existing property approved during May. The below chart illustrates the elevated value of plans approved in May, with only two months during the last five years exhibiting a higher value of plans approved.

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While the 12 months cumulative number of plans approved is still well down from peak levels, the 12 month cumulative value of plans approved has rebounded due to the strong values in May and June. The 12 month cumulative number of plans approved fell to 2,802 from 2,815 in May, while the 12 month cumulative value of plans approved decreased from N$2,078.5 million to N$2,057.2 million.

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In our view the construction sector will remain one of the leading growth and development sectors for 2015 in the Namibian economy, with both private sector and government having aggressive development plans. However, many such plans fall out of the Windhoek municipal area, and as such are not captured in the monthly building plan statistics.

 

PSCE – May 2015

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Overall

Total credit extended to the private sector increased by N$1.0 billion, or 1.4%, in May 2015, taking total credit outstanding to N$73.0 billion. On an annual basis PSCE growth was in line with the 16.8% growth rate recorded in April. A net total of N$9.9 billion worth of credit has been extended over the last 12 months. Of this N$9.9 billion, approximately N$5.4bn was issued to businesses, while N$4.5bn was taken up by individuals.

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Credit extension to households

Credit extension to households expanded by 1.0% on a monthly basis and 11.9% on an annual basis in May, showing little reaction to the interest rate increase of February 2015. It is worth remembering that the transmission mechanism between rate hikes and PSCE contractions is relatively slow, particularly when interest rate increases are small.

Household mortgage loans expanded by 1.1% month on month and continue to make up the majority of credit extended to households. Mortgage loans to individuals make up almost 40% of total credit extended. Overdrafts expanded by 1.0% on a monthly basis, and other loans and advances increased by 0.7%.

Instalment credit makes up the second largest component of credit extended to households but is the fastest growing component with a year on year growth rate of 17.3% compared to the 11.9% growth seen in total credit extended to households. This points to a nation that is becoming more comfortable with the use of debt for private consumption. Installment credit is often used to purchase consumer goods and could be seen as a non-productive utilization of credit, and much of this is spent on imported goods.

Credit extension to corporates

Credit extension to corporates grew by 1.7% on a month on month basis and 21.4% year-on-year In May, meaningfully higher than the growth of credit extended to households once again. This expansion was, primarily driven by huge growth in mortgage loans, up 24.0% y/y, followed by other claims, 48.3% more than a year ago. The rapid uptake of credit by businesses can, at least partly, be attributed to the rapid expansion of the local economy as well as the potential growth in such yet to be unlocked.

Reserves and money supply

The stock of foreign reserves decreased at the end of May 2015. International reserves stood at N$13.7 billion at the end of May 2015, down from N$15.4 billion at the end of the preceding month. The slowed growth mainly came as a result of increased government expenditure and net capital outflows from commercial banks during May 2015.

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Outlook

Due to strong wealth effects as a result of prolonged and abnormally high growth, we believe that demand for credit will remain high, while real income growth will allow suppliers of debt to continue to lend with a fair level of confidence. Additionally, the lagged effects of increasing interest rates mean that it is unlikely that we will seen a major impact on credit demand by households for a period of 6 to 18 months after rate hikes start, provided that the magnitude of the hiking cycle is sufficient to cause an impact. However, the decline in reserves is cause for concern, as is the peculiar growth in installment credit seen through May, and these factors may result in a sooner, and more aggressive, interest rate hike than previously expected.