SOUTH AFRICAN CONSUMPTION GAINS MOMENTUM.

PositionHealthy internal demand should contribute to approximately 3.4% expansion of GDP in 2003

Strong growth in household consumption and industrial investment helped to shelter South Africa from the global economic downturn over the past year. Internal demand for South African goods and services should remain firm through the first half of 2003, contributing to GDP expansion of about 3.4%.

Wage increases in excess of 5% during 2003 should prevent any deterioration in purchasing power. Inflation will peak at about 8.5% late in 2002 before retreating to about 6% in 2003. The rate of household expenditure growth for non-durable goods should rise faster than the rate for durables during the upcoming year. Look for year-on-year growth in non-durable sales in the range of 2% to 4% through the first half of 2003, approaching 5% by year's end. To a great degree, that growth will be driven by demographic factors rather than broad-based economic expansion.

Sales of high-end durables will not live up to potential in 2003 because high unemployment will continue to batter consumer confidence. Year-on-year growth in sales of durables will be less than 2.5% during the first quarter and should not exceed 4% until at least the third...

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