The behaviour of disaggregated transitory and potential output over the economic cycle

This paper examines the behaviour of disaggregated transitory and potential output over the economic cycle in South Africa. Aggregate output and output of the economic sectors and industries were decomposed into their transitory and potential components. These components were then examined for comovement. The results of the transitory component generally show a moderate to strong positive comovement between aggregate output and output of all the economic sectors and majority of the industries. The results of the potential component have generally show a weak positive comovement between aggregate output and output of majority of economic sectors and the economic industries. A generally weak comovement between aggregate output and output of general government services and community, social and personal services highlights a more laissez faire approach to economic management. Contrary to the investment literature, there does not seem to be a definite distinction between the companies industry categories, such as the defensive, cyclical and sensitive industries