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ECS2603 summary notes
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Summarised notes for Chapter 1 through to 12 of the SA Financial Indicators textbook for UNISA BComm qualification.
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ECS2603 – South African Economic IndicatorsJuly 2017
1 LEARNING UNIT 2.............................................................................................. 2
2 LEARNING UNIT 3.............................................................................................. 6
3 LEARNING UNIT 4............................................................................................ 12
4 LEARNING UNIT 5............................................................................................ 13
5 LEARNING UNIT 6............................................................................................ 17
6 LEARNING UNIT 7............................................................................................ 20
7 LEARNING UNIT 8............................................................................................ 27
8 LEARNING UNIT 9............................................................................................ 33
9 LEARNING UNIT 10.......................................................................................... 36
10 LEARNING UNIT 11 ...................................................................................... 40
11 LEARNING UNIT 12 ...................................................................................... 44
12 LEARNING UNIT 12 ...................................................................................... 46
,1 LEARNING UNIT 2
CHAPTER 1 OF TEXTBOOK
Economic indicators are used to assess the performance of the economy, judge the
effectiveness of economic policy, compare the economic performance to other
countries and make economic forecasts.
Many economic indicators reported in the media are not economic indicators in the
narrows sense of the word but rather financial indicators.
Pure economic indicators examples: GDP, rate of economic growth, CPI, PPI, inflation
rate, unemployment rate, various interest rates, the money stock, the balance of
payments, exchange rates, budget deficit and the national debt.
Single numbers or bits of information are meaningless unless they are compared
with something else. (Same for economic indicators)
Assessing the performance of the Economy
Different individuals and groups gauge the performance of the economic in terms of
their own interests. (Adopt a blinkered approach)
Macroeconomic level objectives for judging the state of the economy (EFPBE):
• Economic growth
• Full employment
• Price stability
• Balance of payments stability
• Equitable distribution of income
Sources of economic data
2 most important agencies in SA that collect, publish and disseminate economic data
is Statistics South Africa and the South African Reserve Bank.
Stats SA is a central government body in SA authorised to compile and publish
national statistics – they publish the most comprehensive collection of annual SA data.
Contains information on 15 categories of data.
SARB Quarterly Bulletin – best known and frequently quoted of all data sources.
Published at end of each quarter.
Monthly release of select data – between SARS Quarterly Bulletin, SARB updates
selected monthly money, banking and statistics and issues a Monthly Release of
Selected Data.
Bulletin of Statistics – regular quarterly publication of Stats SA which can be used to
update SA Statistics. Cover 14 categories of monthly, quarterly, and annual data but
individual time series are fairly short (2/3 year)
P Series of Statistical Releases – P0141 Statistical release which contains data on the
CPI for the previous month.
,Stats in brief – pocket guide on 18 different topics, ranging from geographic to
government finance.
Quarterly Labour Force Survey (QLFS) – published by Stats SA approximately a
month after the end of each quarter. Contains results of rotating panel household
survey specifically designed to measure the employment and unemployment in the
country. Measures formal and informal employment.
Budget Review – published annual by National Treasury to coincide with the Minister’s
budget speech.
Secondary data sources – statistics published by agencies and institutions in original
or altered form design to facilitate interpretation and analysis.
International Economic data
Drawing international comparisons of key economic indicators. International agencies
such as the International Monetary Fund (IMF) and World Bank and the United Nations
(UN) regularly publish data for all countries.
International Financial Statistics – monthly publication of the IMF which covers all
aspects of domestic and international finance. Contains data on IMF member
countries (including SA) on exchange rates, international liquidity, money and banking,
trade and prices as well as some national accounting data.
Interpreting Economic Data
Data still has to be interpreted, this requires understanding the data, knowledge of
which data is to be used in a specific case and an awareness of limitations of the data.
You can lie with statistics.
Data mining is open to abuse.
Economic data must be handled with care, basic requirements when economic data
is being used:
• Always be familiar with the definitions of the indicators;
• Determine to which period the data relates;
• Check whether the data is seasonally adjusted – this is for weekly, monthly and
quarterly data;
• Check whether the variable is a stock or flow;
• Ascertain the geographic coverage of the data;
• Check whether the data has been adjusted for inflation;
• Check who produced the figures (whether government agency, private
researcher or market research company);
• Check whether the data will be revised or whether data for previous periods
have not been revised (CPI and PPI are not revised, whilst GDP and value of
retail sales are revised)
• When examining series of observation over time, useful to plot data on a graph
to determine the trend of the variable in question and determine if there are
structural shifts in this trend
, • Ascertain start and end points for calculating changes
• Avoid mistake of confusing levels with rates of change (or percentages)
• Determine any other yardsticks that will aid in interpretation (certain data only
significant when expressed as a ratio of population/GDP)
• Bear in mind that correlation does not imply causation (if two different indicators
exhibit similar trends it does not mean that one is the cause of the other)
• Be careful when international comparisons are made as definitions may differ
between countries while valuation in domestic currencies create a number of
problems
• Most serious error in using economic data result from the failure of making
elementary checks
• Determine which units of measurement are being used – South Africa adopted
the metric system and all stats are expressed in terms of units of the
International Metric System
Volume, Price and Value
Value (PQ) = Price x Volume/Quantity
Volume (Q) = PQ ÷ P
Real and Nominal values
Changes in values have to be adjusted to eliminate the effect of price changes (i.e.
inflation)
The indicators are then expressed at constant/real terms.
Unadjusted values are current/nominal terms.
The nominal data are then deflated by a price index to obtain constant price or real
data.
Nominal value = PQ
Real value = Q = PQ/P
Percentage change
25-20/20 x 100 = 25%
Percentages, percentage points and basis points
To say that there is a 1% increase when a value increases from 10% to 11% is
incorrect – the correct way is to refer to an increase of one percentage point.
In the financial market each percentage point consists of 100 basis points. So an
increase in interest rates of one percentage point is often referred to as an increase
on 100 basis points.
Levels and rates of change
Single most important error in interpreting economic indicators is the tendency to
confuse levels with rates of change. A high level should not be confused with a high
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