After snapping a three-month winning streak in July, South Africa's seasonally adjusted leading economic indicator has well and truly turned the corner, with the latest November 2009 data confirming this trend.

Apart from the aberration in July, the indicator has been rising every month since March. In November it was up a handsome 11.65 percent year-on-year (y/y) (119.8 index level) from 5.81 percent y/y in October.

Property strategist from FNB, John Loos, says this bodes well for further improvement in growth in new residential mortgage loans and re-advances granted in the current quarter.

"While prospects for further interest rate cuts don't appear wonderful, it is likely that some of last year's rate-cutting-stimulus still has to be felt early in 2010, while the rise in the leading indicator is also driven by moderately strengthening economic growth signals. An improving economy has positive implications for disposable income growth and thus residential purchasing power in the near term," says Loos.

Growth prospects for next six months

The data showed that things have slowed a little on a monthly momentum basis at 2.83 percent in November from the 3.74 percent month-on-month (m/m) growth in October.

This index provides a barometer of economic growth for at least six months ahead.

The leading indicator had been over 120 and nearer to 130 for the whole of 2007 when the country was enjoying its best run since the Second World War.

The coincident indicator for November was reported at 135.0 from 134.4 a month before. The lagging indicator was reported at 119.7 from 119.0.

The drastic declines in South Africa's leading and coincident economic indicators had cemented the idea that South Africa was in a recession. And this was borne out in no uncertain terms when news broke of a ?6.4 percent GDP decline in Q1 last year from ?1.8 percent before.

Recession is officially over

However, the country has now officially pulled itself out of the recessionary quagmire. South Africa's real gross domestic product (GDP) at market prices on a quarter-on-quarter (q/q) seasonally adjusted annualised (saa) basis rose by 0.9 percent in the third quarter of 2009 from a revised -7.4 percent (?6.4 percent) in the first and a revised -2.8 percent (?3.0 percent) in the second quarter.

This snaps the first instance of three consecutive quarters of negative growth seen since the fourth quarter of 1992.

The coincident indicator is an economic factor that varies directly and simultaneously with the business cycle, thus indicating the current state of the economy. The lagging indicator changes after the economy has already begun to follow a particular trend.

The Sarb uses over 200 economic time series to determine the turning points of the South African business cycle. Using these indicators, the leading, coincident and lagging composite business cycle indices are produced that indicate the direction of the change in economic activity rather than the level of economic activity.

The central bank will be using this data in its repo deliberations, which began on Monday and end the day after.

Little hope for rate cut

South Africa's repo rate is expected to remain unchanged at 7.0 percent when the decision is made on Tuesday next week, according to a survey of leading economists by I-Net Bridge.

However, two of the nine economists hold out hope that a cut of 50 basis points could be in the offing when Gill Marcus makes her second decision as central bank Governor.

One economist in the survey feels this will be the first real opportunity for Marcus to show her hand.

The economists generally feel, however, that inflation is not yet convincingly back on target and there are now tentative signs of an economic recovery.

However, one of the economists not expecting a cut said further easing could not be ruled out totally.

The decision will be made shortly after 3pm on Tuesday.