Wednesday December 05 2018
South Africa GDP Annual Growth Beats Estimates in Q3
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African economy advanced 1.1 percent year-on-year in the third quarter of 2018, after expanding 0.4 percent in the prior period and above market consensus of a 0.5 percent growth. It was the strongest growth rate since the last quarter of 2017, mostly boosted by a rebound in agriculture and transport, storage and communication sectors.

Higher growth rates were seen for finance, real estate and business services (2.8 percent compared to 1.8 percent in Q2); manufacturing (1.6 percent compared to 0.5 percent); trade, catering and accommodation (0.9 percent compared to 0.1 percent); electricity, gas and water (1.4 percent compared to a flat reading); and general government services (1.0 percent compared to 0.8 percent). Additionally, output rebounded for agriculture (1.2 percent compared to -6.9 percent) and transport, storage and communication (1.2 percent compared to -0.2 percent).

On the other hand, the mining and quarrying sector contracted (-3.5 percent compared to 0.4 percent) while output shrank further for construction (-1.9 percent compared to -1.1 percent). Also, slower growth rate was recorded for personal services (0.6 percent compared to 1.0 percent).

On a seasonally adjusted quarterly basis, the economy expanded 2.2 percent on quarter in the three months to September, following a downwardly revised 0.4 percent contraction in the previous period and beating market expectations of a 1.6 percent expansion. It was the strongest growth rate since the last quarter of 2017 and shrinking for two consecutive periods, mainly driven by manufacturing, transport and communication and real state and business services.




Tuesday December 04 2018
South Africa Economy Returns to Growth in Q3
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African economy grew a seasonally adjusted annualized 2.2 percent on quarter in the three months to September of 2018, following a downwardly revised 0.4 percent contraction in the previous period and beating market expectations of a 1.6 percent expansion. It was the strongest growth rate since the last quarter of 2017 and after shrinking for two consecutive periods, mainly driven by manufacturing, transport and communication and real state and business services.

The agriculture, forestry and fishing industry advanced 6.5 percent, after contracting 31.9 percent in the second quarter of the year, mostly due to higher production of field crops, horticultural and animal products.

Manufacturing grew by 7.5 percent, following a 0.6 percent expansion, driven by production of basic iron and steel, metal products and machinery, wood and paper, petroleum products and motor vehicles. 

Transportation, storage and communication rose by 5.7 percent, compared to a 4.9 percent decline in the previous period, boosted by freight transportation.

The finance, real estate and business services sector increased by 2.3 percent, after expanding 1.9 percent in Q2, mainly due to financial intermediation and insurance and real estate. Additionally, general government services rebounded by 1.5 percent, following a 0.4 percent drop.

On the other hand, the main negative contributions came from mining and quarrying (-8.8 percent compared to 8.1 percent in Q2); construction (-2.7 percent compread to 2.1 percent) and utilities (-0.9 percent compared to 2.2 percent).

Year-on-year, the economy expanded 1.1 percent year-on-year in the third quarter of 2018, after a 0.4 percent growth in the prior period and above market consensus of a 0.5 percent expansion. It was the strongest growth rate since the last quarter of 2017. 




Friday November 30 2018
South Africa Trade Gap Largest in 9 Months
South African Revenue Service | Stefanie Moya | stefanie.moya@tradingeconomics.com

South Africa trade deficit widened to ZAR 5.55 billion in October of 2018 from a downwardly revised ZAR 3.83 billion in the previous month and compared with market expectations of a ZAR 2.25 billion shortfall. It was the largest trade gap since January, as imports rose faster than exports. Considering the first ten months of the year, the country posted a ZAR 8.82 billion deficit.

Imports increased 9.7 percent month-over-month to ZAR 127.87 billion, mainly driven by higher purchases of vehicles and transport equipment (35 percent); chemical products (21 percent); original equipment components (11 percent); and machinery and electronics (8 percent). Meanwhile, imports declined for mineral products (-7 percent). Main import partners were: China (19.1 percent of total imports), Germany (9.1 percent), Saudi Arabia (6.7 percent), the US (5.7 percent) and Nigeria (4.9 percent).

Exports advanced 8.5 percent month-over-month to ZAR 122.32 billion, boosted by higher sales of mineral products (15 percent); vehicles and transport equipment (14 percent); prepared foodstuff (35 percent); and machinery and electronics (18 percent). On the other hand, exports dropped for vegetable products (-30 percent) and other unclassified (-59 percent). The most important export partners were: China (9.7 percent of total exports), Germany (9.4 percent), the US (6 percent), the UK (5.6 percent) and Japan (4.8 percent).

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade gap of ZAR 12.97 billion in October.




Thursday November 22 2018
South Africa Hikes Interest Rate to 6.75%
SARB | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African Reserve Bank raised its benchmark repo rate by 25 bps points to 6.75 percent on November 22nd 2018, surprising markets who expected no changes. It is the first hike in borrowing cost since March 2016, amid a rise in the inflation trajectory which continues to deviate from the mid-point of the target range. Policymakers said the decision is accommodative and that monetary policy actions will continue to focus on anchoring inflation near the target range mid-point.

Excerpts from the statement by Governor Lesetja Kganyago:

The inflation forecast has improved marginally since the previous MPC. While remaining within the inflation target range throughout the forecast period, the SARB’s model projects an increase in headline inflation, albeit slightly lower than the September projection. Headline inflation is now expected to average 4.7% in 2018 (down from 4.8%), before increasing to 5.5% in 2019 (down from 5.7%) and moderating to an unchanged 5.4% in 2020. Headline CPI inflation is now expected to peak at around 5.6%, in the third quarter of 2019. The forecast for core inflation is 4.3% in 2018 (down from 4.4%), 5.3% in 2019 (down from 5.6%) and 5.5% in 2020. These inflation projections are based on an interest rate path generated by the SARB’s Quarterly Projection Model (QPM).

The domestic growth outlook remains challenging. Recent monthly data on economic performance in key sectors suggests a more moderate recovery in growth in the third quarter than expected in September. The SARB now forecasts growth in 2018 to average 0.6% (down from 0.7% in September). The forecast for 2019 and 2020 is unchanged at 1.9% and 2.0% respectively. At these growth rates, the negative output gap is wider than at the time of the previous MPC meeting. The output gap will narrow but will not close by the end of 2020, as previously expected.

The MPC assesses the risks to the growth forecast to be moderately on the downside. As previously highlighted the Committee remains of the view that current challenges facing the economy are primarily structural in nature and cannot be solved by monetary policy alone. Prudent macroeconomic policies are essential to ensuring that growth is sustainable and that the economy is more resilient to shocks. These should be complemented by implementation of credible structural policy initiatives that make a marked impact on the cost structure of the economy, potential output and employment.

The MPC noted the rising inflation trajectory which, while remaining within the target range, continues to deviate from the mid-point of the target range. The MPC continues to assess the risks to the longer-term inflation outlook to be on the upside. These risks include tighter global financial conditions, a weaker exchange rate, higher wage growth, international oil prices and rising electricity and water tariffs. However, demand pressures are still not assessed to pose a significant risk to the inflation outlook.

The MPC had to decide whether to act now or later. Given the relative stability in the underlying core inflation measure, delaying the adjustment could give the MPC room to re-assess these unfolding developments in subsequent meetings. However, delaying the adjustment could cause inflation expectations to become entrenched at higher levels and thus contribute to second round effects, which would require an even stronger monetary policy response in the future.

Against this backdrop, the MPC has decided to increase the repurchase rate by 25 basis points to 6,75% per year, effective from 23 November 2018. Three members preferred an increase and three members preferred an unchanged stance.




Wednesday November 21 2018
South Africa Inflation Rate Rises to 3-Month High in October
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa increased to 5.1 percent in October of 2018 from 4.9 percent in the previous month and in line with market expectations. It was the highest inflation rate since July, mainly driven by cost of transport.

Year-on-year, prices rose faster for transport (10.5 percent compared to 8.7 percent in September), mostly private transport operation (18.8 percent compared to 15.2 percent) and fuel (22.8 percent compared to 18.5 percent); recreation & culture (0.7 percent compared to 0.5 percent); clothing & footwear (2.0 percent compared to 1.9 percent) and communication (1.2 percent compared to 1.1 percent).

On the other hand, cost slowed for food & non-alcoholic beverages (3.4 percent compared to 3.9 percent); housing & utilities (5.2 percent compared to 5.3 percent); miscellaneous goods and services (5.4 percent compared to 5.5 percent); restaurant and hotels (4.2 percent compared to 4.6 percent) and health (5.0 percent compared to 5.4 percent). Also, inflation was steady for alcoholic beverages & tobacco (4.2 percent, the same as in September); household contents and services (3.0 percent) and education (6.7 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, remained unchanged at 4.2 percent in October, the same as in September, and slightly below market consensus of 4.3 percent. Compared to July, core consumer prices went up 0.1 percent, easing from a 0.5 percent gain in the prior month.

On a monthly basis, consumer prices advanced 0.5 percent, the same as in the previous month and matching market expectations. 




Wednesday October 31 2018
South Africa Trade Balance Swings to Deficit in September
South African Revenue Service | Stefanie Moya | stefanie.moya@tradingeconomics.com

South Africa trade balance shifted to a ZAR 2.95 billion deficit in September of 2018 from a downwardly revised ZAR 8.77 billion surplus and well below market expectations of a ZAR 4.0 billion surplus. It was the smallest trade gap since February. Considering the January to September period, the country posted a ZAR 0.33 billion gap.

Exports fell 2.6 percent month-over-month to ZAR 113.69 billion in September 2018, mainly due to lower sales of vegetables products (-16 percent); machinery and electronics (-7 percent); vehicles and transport equipment (-6 percent) and base metals (-5 percent). Main export partners were: Germany (9.1 percent of total exports), China (7.2 percent), the US (6.8 percent), the UK (5.8 percent) and India (5.3 percent).

Imports jumped 8.0 percent month-over-month to ZAR 116.65 billion, boosted by higher purchases of mineral products (75 percent) and machinery and electronics (5 percent). On the other hand, imports dropped for original equipment components (-12 percent); vehicles and transport equipments (-8 percent) and chemical products (-5 percent). The most important import partners were: China (17.7 percent of total imports), Germany (9.8 percent), Saudi Arabia (9.2 percent), the US (6.2 percent) and Nigeria (4.5 percent).

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade deficit of ZAR 11.78 billion in September.


Tuesday October 30 2018
South Africa Jobless Rate Highest in a Year
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The unemployment rate in South Africa rose to 27.5 percent in the third quarter of 2018 from 27.2 percent in the previous period. It was the highest jobless rate since the third quarter of 2017, as the number of unemployed increased by 127 thousand to 6.21 million. Meantime, the number of employed advanced by 92 thousand to 16.38 million.

The number of unemployed grew by 127 thousand to 6.21 million from 6.08 million in the second quarter of the year. Employment increased by 92 thousand to 16.38 million from 16.29 million in the prior period. Job losses were recorded in the formal sector (-65 thousand), private households (-30 thousand) and in agriculture (-1) while gains ocurred in the informal sector (+188 thousand).

The labour force went up by 219 thousand to 22.59 million from 22.37 million in the previous quarter while those detached from dropped by 66 thousand to 15.40 million from 15.46 million.

The expanded definition of unemployment, including people who have stopped looking for work, rose to 37.3 percent in the third quarter of 2018 from 37.2 percent in the the second quarter.

A year earlier, the jobless rate was higher at 27.7 percent.




Wednesday October 24 2018
South Africa Annual Inflation Rate Steady at 4.9%
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa was at 4.9 percent in September of 2018, unchanged from the previous month and in line with market expectations. Cost of food and non-alcoholic beverages rose faster while transport prices slowed.

Year-on-year, prices increased further for food & non-alcoholic beverages (3.9 percent compared to 3.5 percent in August), namely processed food (2.9 percent compared to 1.9 percent); recreation & culture (0.5 percent compared to 0.3 percent); household contents and services (3.0 percent compared to 2.9 percent); restaurant and hotels (4.6 percent compared to 4.0 percent) and health (5.4 percent compared to 5.2 percent). 

Meanwhile, cost eased for transport (8.7 percent compared to 9.5 percent), mostly private transport operation (15.2 percent compared to 19.2 percent) and fuel (18.5 percent compared to 23.6); miscellaneous goods and services (5.5 percent compared to 5.6 percent); alcoholic beverages & tobacco (4.2 percent compared to 4.6 percent) and communication (1.1 percent compared to 1.2 percent). Additionally, inflation was steady for housing & utilities (at 5.3 percent, the same as in August); clothing & footwear (1.9 percent) and education (6.7 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, remained unchanged at 4.2 percent in September, the same as in August, matching market consensus. Compared to July, core consumer prices increased to 0.5 percent, after being unchanged in the prior month.

On a monthly basis, consumer prices went up 0.5 percent, after declining 0.1 percent in August and higher than market expectations of a 0.4 percent gain.


Friday September 28 2018
South Africa Trade Balance Swings to Surplus in August
South African Revenue Service | Stefanie Moya | stefanie.moya@tradingeconomics.com

South African trade balance shifted to a ZAR 8.79 billion surplus in August of 2018 from an upwardly revised ZAR 5.29 bilion deficit in July and above market expectations of a ZAR 5 billion surplus. Considering the January to August period, the country posted a ZAR 2.66 billion surplus.

Exports increased 9.4 percent month-over-month to ZAR 116.88 billion in August 2018, driven by higher sales of vehicles and transport equipment (32 percent); mineral products (10 percent); precious metals and stones (7percent); chemicals (12 percent) and base metals (5 percent). The most important export partners were: China (9.0 percent of total exports), Germany (7.9 percent); the US (5.8 percent), the UK (5.3 percent) and India (5.0 percent).

Imports dropped 3.6 percent month-over-month to ZAR 112.15 billion, mainly due to lower purchases of mineral products (-37 percent) and  vegetables (-33 percent). On the other hand, higher purchases were recorded for precious machinery and electronics (6 percent); metals and stonces (28 percent) and original equipment components (8 percent). Main import partners were:  China (19 percent of total imports), Germany (11.7 percent), the US (6.3 percent), India (4.7 percent) and the UK (3.7 percent). 

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade surplus of ZAR 0.05 billion in August.


Thursday September 20 2018
South Africa Leaves Interest Rate Unchanged at 6.5%
SARB | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African Reserve Bank held its benchmark repo rate at 6.5 percent on September 20th, 2018, as widely expected. The Committee said the decision is accomodative given the current state of the economy. Policymakers noted risks and uncertainties at higher levels and a deterioration in the inflation outlook boosted by multiple supply-side factors. The Committee added that they will continue to monitor and will act if its necessary. Since the previous meeting, the country entered into recession.

Excerpts from the statement by Governor Lesetja Kganyago:

Despite remaining within the inflation target range throughout the forecast period, the SARB’s model projects an increase in headline inflation, peaking at levels closer to the upper end of the target range. Headline inflation is now expected to remain at an average of 4.8% in 2018, before increasing to 5.7% in 2019 (up from 5.6%) and moderating to 5.4% in 2020. Headline CPI inflation is expected to peak at around 5.9 in the second quarter of 2019. The forecast for core inflation is 4.4% in 2018 (down from 4.6%), 5.6% in 2019 (up from 5.5%) and 5.5% in 2020 (up from 5.3%). The impact of the VAT increase continues to be muted. The more elevated headline inflation trajectory is explained by the weaker rand exchange rate and higher oil prices.

Since the July MPC, the rand has depreciated by 7.3% against the US dollar, by 8.1% against the euro, and by 7.1% on a trade-weighted basis. At current levels, the SARB’s model assesses the rand to be undervalued. The implied starting point for the rand is R14.20 against the US dollar, compared with R13.40 at the time of the previous meeting. Tighter global financial conditions and the change in investor sentiment towards emerging markets remain key external risks to the rand, and it is likely that the rand, along with other emerging market currencies, will remain volatile

The domestic economy has entered a technical recession, following two consecutive quarters of contracting economic activity. Quarter-on-quarter GDP contracted by 0.7% in the second quarter and GDP data for the first quarter was revised down from -2.2% to -2.6%. However, on a year-on-year basis, GDP growth in the first quarter was 0.8% and 0.4% in the second quarter. The SARB now forecasts growth in 2018 to average 0.7% (down from 1.2% in July). The forecast for 2019 and 2020 is unchanged at 1.9% and 2.0% respectively. At these growth rates, the negative output gap is wider in the near term, but is still expected to close by the end of 2020 as GDP growth rates exceed potential growth.

The MPC noted the rising inflation trajectory which, while remaining within the target range, is moving further away from the mid-point of the target range. The MPC assesses the risks to the inflation outlook to be on the upside. The Committee remains concerned about growing risks to the inflation outlook, mainly due to exchange rate risks related to both domestic and external factors, elevated international oil prices and the possibility of higher electricity tariffs. However, demand pressures in the economy are not assessed to pose a significant risk to the inflation outlook.

The MPC assesses the risks to the growth forecast to be moderately on the downside. The Committee continues to be of the view that current challenges facing the economy are primarily structural in nature and cannot be solved by monetary policy alone. Commitment to credible structural policy initiatives and implementation thereof is required to make a marked impact on the cost structure of the economy, potential output and employment. Monetary policy is most effective in addressing cyclical growth.

The MPC has decided to keep the repurchase rate unchanged at 6.5% per annum.