Regional eXplorer (ReX) update
March 2009

IHS Global Insight is pleased to present the first 2009 update to ReX. Once again, you will be glad to know that this release includes many important updates with, as always, a strong focus on accuracy and reliability. These changes include a fully redesigned IHS Global Insight employment model - now using the official definition of unemployment, newly refreshed economic forecasts and updates, and a slight improvement to functionality, based on requests from our valued users.

We are also continually improving upon the ReX product and would like to invite each of you to take part in that process by filling out an online survey which you will receive via email in the next few weeks.

We would also like to bring to your attention the proposed boundary changes regarding Merafong Local Municipality's (Khutsong) move back to the Gauteng province.  Please note that this version of ReX is based upon the December 2005 boundaries, when the Merafong local municipality was part of the North West province, and is reflected as such in the provincial totals.

Global slowdown eats into South African production
Although South Africa's financial sector appears to have withstood the 2008 global financial market meltdown, the subsequent global slowdown, coupled with slowing commodity prices, will undermine the country's export performance. With anecdotal evidence suggesting that South African business may retrench between 35,000 and 250,000 workers in the coming months, short-term growth is likely to remain negative as disposable incomes shrink.

This is despite the fact that public sector employment growth has supported overall employment. Although this may not be sustainable in the long run, public sector employment grew from 3.3% in the first quarter of 2008 to 5.0% in the second quarter.

With weakening household consumption demand, slower private fixed investment, and a continued global slump, IHS Global Insight has revised growth forecasts for the first quarter of 2009 downwards. IHS Global Insight now expects a contraction in growth, which, following the large contraction in the fourth quarter of 2008, will see the economy in a recession for a short period. Nevertheless, following expected interest-rate cuts, lower fuel prices, and supportive fiscal policy, we do expect this contraction to be short lived.

In conclusion, although short term economic growth and employment has (and will continue to be) affected by the global downturn, IHS Global Insight expects the long term fundamentals of the South African economy to remain in place and for South Africa to return to a positive growth path within the next year. Sound fiscal and monetary policy will be integral to this stable macroeconomic outlook.

Labour module changes
With the release of the StatsSA QLFS results, IHS Global Insight has undertaken to completely redesign our regional employment model. The most noticeable change to the figures is the shift from the expanded definition to the official definition of unemployment. In other words, whereas IHS Global Insight used to define a person as unemployed if they just wanted a job, we now define a person as unemployed if they both want a job and have been looking for a job in the last four weeks.

There are number of reasons for this change, but most importantly, that it is more in line with the StatsSA definition of unemployment.  Furthermore, with the move to the QLFS methodology, IHS Global Insight believes that the way discouraged workers (the difference between the expanded definition and the strict definition of employment) are measured by the QLFS is completely different to the way it was measured previously and would result in a non continuous employment series should we continue measuring the expanded definition of unemployment.

This redesign process gave IHS Global Insight the freedom to overhaul some of the old assumptions and generally improve the regional level accuracy of many of the employment figures.

Regarding the measurement of employment, we would also like to bring to your attention the difference between a 'place of work' variable versus a 'place of residence' variable. As many of our clients will surely be aware of, it is far more accurate to measure the number of jobs in the economy per sector by polling the relevant businesses in each sector. This results in the number of jobs being reported where the businesses are located, and this is what we call a 'place of work' variable. However, unemployment obviously cannot be measured this way, and we therefore use the relevant labour force surveys, which takes place at an individual's home; which results in what we call a 'place of residence' variable.

Therefore, our clients are reminded to bear in mind that employment is shown at 'place of work' but unemployment, and the economically active population (EAP) at 'place of residence'. The easiest way to interpret this is as follows: the employment data shows the number of people working in the region, regardless of where they live, but the unemployment and EAP data shows the number of people unemployed (or economically active) that are actually living in the region. This is important because EAP should always be equal to the unemployed plus the employed. However, because of the different ‘place of work' and ‘place of residence' variables involved, this relationship will only hold in a closed economy, and not at regional level. This is an important difference that is commonly misunderstood.

Finally, with the first four QLFS surveys released by StatsSA, IHS Global Insight is able to present preliminary 2008 employment figures. These will remain preliminary figures until we can include the final detailed QLFS data from 2008 into our models.

Functionality
One function update made in this release of ReX is the ‘View' filter that users can access on the top right hand side of their screen. This allows clients to filter the available topics to show either charts only, tables only, or both. This should prove handy to those clients that subscribe to the full ReX topic suite and often find the plethora of options difficult to navigate.

On extracting the data, there is a new option that provides more flexibility with regards to structuring the final output.  On the topic-down orientation, we have a new option that is designed to optimise data output. This option applies to multi-dimensional topics, where we have more than one option. The best way to understand this concept is by testing different options and observing the results. The option can be accessed after pressing the ‘Download' button. By default, optimise output should, under normal circumstances, be preferable. An example of the different outputs, using the same data, is shown below.

Standard (old) output:                                            Optimised (new) output:

Upcoming releases: 2008 Figures
IHS Global Insight is currently working on updating most of the ReX topics to include 2008 figures. We will continue to carry out the strictest quality control on each dataset that is used as input into the model and hope to have most of the topics updated by the next quarterly release of ReX.

Client Feedback
As always, IHS Global Insight values two-way communication with our clients and user feedback is welcomed in order to refine the suite of ReX models. Output generated by these models are merely a reflection of the quality of data input, and any improvement in the reliability of data input - for specific areas or sectors - will render improved results.

As always, if you have more detailed data available for any indicator, which could be used as an input to any of our ReX models, we would appreciate the opportunity to analyse the viability of integrating such data into our systems.

Please send any suggestions or feedback to info@globalinsight.co.za or contact IHS Global Insight on +27 (0)12-665-5420.