US to retain pole position on back of gas, IT, 3D printing revolution – Shapiro

25th October 2013

By: Irma Venter

Creamer Media Senior Deputy Editor

  

Font size: - +

The decade from 2010 to 2020 would see the US economy remain in pole position as the world's largest economy, said Sasfin Securities deputy chairperson David Shapiro on Friday.

Speaking at a Wesbank breakfast, held at the Johannesburg International Motor Show, he said these ten years would be lead by advancements in information technology (IT), oil and gas, and three-dimensional (3D) printing – all markets which would be dominated by the US.

Shapiro described the period from 1990 to 2000 as probably the “best period our generation would see”, as the collapse of communism opened up major new markets, followed by an explosion in IT and technology – unfortunately followed by the famous, and rather inevitable, tech-bubble on the stock market.

“That was a proper bubble. There is no bubble now. We are far from that.”

The decade from 2000 to 2010 saw a commodity supercycle, driven largely by the emergence of China.

While China would continue to be important in the years up to 2020, Shapiro said the country was becoming a consumer economy, with consumption expected to overtake investment as this country’s largest contributor to gross domestic product (GDP).

China was growing at its slowest pace in 13 years – “by design” – as the government wanted a slower, safer economy.

Emerging markets, in general, would also still be important up to 2020, but would fail to dominate, said Shapiro.

“Emerging markets continue to disappoint. They have been unable to turn the opportunities that existed into growth.”

India was plagued by red tape and corruption. Brazil had “let go of the purse strings in 2008”, and Russian growth was flat. China was facing serious social inequality, widespread corruption, rising real estate cost and growing debt.

South Africa suffered from widespread labour unrest, which disrupted production, a declining manufacturing sector, falling commodity prices and electricity supply constraints.

Africa, however, said Shapiro, should not be underestimated as a potential lucrative market. He noted, though, that doing business on the continent was “tough”, asking “a lot of sweat” to operate across 50 borders.

Shapiro also noted that Europe’s economy was finally stabilising, with even the troubled Spain recording 0.1% growth in the third quarter of this year.

Developed economies knew how to “change direction” when times became tough and when growth opportunities emerged, he added.

A lack of skills and infrastructure, and the existence of significant red tape, made it difficult for emerging markets to react.

CHINA, US WAGES GAP CLOSING
Much of the US’ re-emergence would be linked to a natural gas revolution, said Shapiro.

Natural gas prices were at a 20-year low, with production taking place at a fraction of the cost of petrol and diesel. This, in turn, brought down logistics and manufacturing costs.

“All of this is the result of fracking, and it will boost the US economy further,” said Shapiro. “By 2020 the US will be a net exporter of energy.”

This would, in turn, lead to a change in the way the US economy operated, with manufacturing making a strong comeback, especially as large multinationals returned manufacturing to the US.

The gas revolution could also change the world’s geopolitics, with the Middle East becoming less important.

The Chinese Yuan had also been appreciating against the dollar in recent times, which meant that the Asian country could currently offer only a roughly 15% advantage in manufacturing costs, which was “not great enough” to force manufacturing out of the US, noted Shapiro.

“Wages in the US are now competitive.”

Rising GDP growth would also see US debt – a current concern – shrink as a percentage of GDP.

THE RISE AND RISE OF THE JSE
Despite slowing growth in South Africa, the JSE on Tuesday broke through the 45 000 point mark for the first time.

How was this possible, when the local economy was struggling to record noticeable growth?

The JSE no longer represented South Africa, explained Shapiro. It acted more as international index, with a large portion of JSE earnings dollar-based.

Simply put: it reflected the international economy, and not the South African economy.

Shapiro added that the top 15 companies which made up 70% of the JSE were really international companies, such as British American Tobacco (up 25% over the last 12 months), SABMiller (recording 44% growth over the past 12 months), Richemont and Naspers.

A lot of these gains were, however, made on the back of the depreciating rand.

Edited by Creamer Media Reporter

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION