The JSE All Share Index. Those of us who know better remain focused on the real economy. We’ve digested the March 2009 manufacturing numbers and understand that April’s will be worse… After all, South Africa comes to a virtual standstill this month as workers put their feet up on an array of public holidays and, of course, the elections.

After the latest round of Statistics SA releases, economists confirm South Africa Inc’s slide into technical recession. And while everyone points fingers at the manufacturing sector, they shouldn’t lose sight of the reasons for the sector’s dismal performance. You’ll find it in plummeting demand – aka the struggling consumer! Economists at Standard Financial Markets sum the situation quite nicely. They predict a “vicious circle” leading to “broader demand side weakness!” And corporate South Africa’s already hauling out its survival gear in response, with cost rationalisations, salary cuts and executive pay freezes the order of the day.

Will February retail sales statistics provide some cheer? The sales “tug-of-war” is hotly contested between falling employment and rising consumer disposable income (on the back of lower interest rates and inflation); but it remains to be seen which side emerges victorious. So far, Mr Market is backing the country’s general retailers as the place to be in 2009. Even so – economists forecast a rather depressing 2.5% growth for the second month of this year. That’s not enough for a country of South Africa’s size, given the poverty alleviation requirement for GDP growth of more than 5% per annum. Regardless which side of the recession argument you prefer, the bounces witnessed in equity markets in recent weeks could prove short-lived. The good news for local investors is that things are far worse in the so-called Western superpower states. News from the world’s largest economy is that General Motors is preparing for a possible bankruptcy filing by 1 June. The US Treasury Department – after handing the motor manufacturer more than $13.4bn in federal aid – is driving the process, despite GM’s claim that it can restructure successfully without intervention. Hands up if you recall the major motor manufacturers saying that filing for bankruptcy would be tantamount to throwing in the towel for good! The only solution is for GM to convince corporate bondholders to swap $28bn in debt for GM equity. Would you want to hold GM shares in the current environment?

Signs of an early global recovery are fading fast. Brent crude – a barometer for international economic activity – is languishing near the $50 per barrel mark. According to the International Energy Agency, crude demand will plummet as recession tightens its hold. They predict a drop of 2.4m barrels per day (the daily output of Iraq) to just 83.4m barrels per day through 2009! If you believe in the link between oil prices and economic turnaround, then this is bad news indeed. As more investors realise the worst is yet to come, it makes sense to maintain a defensive investment outlook through the first half of 2009.