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.




Wednesday September 19 2018
South Africa Inflation Rate Unexpectedly Slows to 4.9%
Statistics South Africa | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The annual inflation rate in South Africa dropped to 4.9 percent in August 2018 from a 10-month high of 5.1 percent in July and against market expectations of 5.2 percent. The slowdown in inflation mainly reflected softening prices of transport.

Year-on-year, prices advanced at a slower pace for: transport (9.5 percent vs 10 percent in July), namely fuel (23.6 percent vs 25.3 percent); miscellaneous goods and services (5.6 percent vs 5.7 percent); alcoholic beverages & tobacco (4.6 percent vs 6.0 percent) and recreation & culture (0.3 percent vs 0.4 percent). On the other hand, inflation quickened for housing & utilities (5.3 percent vs 5.2 percent), of which water (11.2 percent vs 11.0 percent) and electricity (7.8 percent vs 7.7 percent); food & non-alcoholic beverages (3.5 percent vs 3.4 percent), mostly vegetables (8.9 percent vs 8.8 percent); household contents and services (2.9 percent vs 2.8 percent) and clothing & footwear (1.9 percent vs 1.8 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, eased to 4.2 percent in August from 4.3 percent in July, slighlty below market consensus of 4.3 percent. Compared to July, core consumer prices were flat, following a 0.6 percent rise in the previous month.

On a monthly basis, consumer prices decreased 0.1 percent, after increasing 0.8 percent in July and compared with market expectations of a 0.15 percent gain.




Tuesday September 04 2018
South Africa GDP Annual Growth Slows to 0.4% in Q2
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African economy expanded 0.4 percent year-on-year in the second quarter of 2018, slowing from a 0.8 percent growth in the previous period and below market expectations of a 1 percent expansion. It was the weakest growth rate since the first quarter of 2016 when the economy contracted 0.3 percent, as production declined mainly for in agriculture, forestry and fishing activities.

Slower growth rates were recorded for trade, catering and accommodation (0.1 percent compared to 0.3 percent in Q1); finance, real estate and business services (1.8 percent compared to 2.1 percent); personal services (1.0 percent compared to 1.3 percent) while electricity, gas and water registered no growth (compared to 1.3 percent in Q1). Also, output dropped for transport, storage and communication (-0.2 percent compared to 1.8 percent) and fell further for agriculture (-5.8 percent compared to 3.2 percent) and construction (-1.1 percent compared to -0.7 percent).

Meanwhile, higher growth rates were seen in general government services (0.8 percent compared to 0.5 percent) and production of mining and quarrying declined less (-0.5 percent compared to -1.2 percent).

On a seasonally adjusted quarterly basis, the economy contracted 0.7 percent on quarter in the three months to June of 2018, following a 2.6 percent fall in the prior period and missing market consensus of a 0.6 percent growth. It was the second consecutive period of contraction, as the main contributors to the drop agriculture, transport and trade. 




Friday September 07 2018
South Africa GDP Contracts 0.7% in Q2
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African economy shrank a seasonally adjusted annualized 0.7 percent on quarter in the three months to June of 2018, following a 2.6 percent contraction in the prior period and missing market consensus of a 0.6 percent growth. It was the second consecutive quarter of contraction with the biggest downward contributions coming from agriculture, transport and trade.

The agriculture, forestry and fishing industry declined 29.2 percent, after contracting 33.6 percent in the the first quarter of 2018, mainly due to lower production of field crops and horticultural products. 

Transportation, storage and communication went down 4.9 percent, reversing from a 0.9 percent expansion in Q1. Decreases were reported for land transport, air transport and transport support services.

The trade, catering and accommodation sector decreased 1.9 percent, following a 3.1 percent fall, as retail and motor trade dropped.

Manufacturing fell 0.3 percent, after a 6.7 percent decline. Most of the divisions reported negative growth rates with the largest downward contributors coming from motor vehicles, parts and accessories and the furniture and ‘other’ manufacturing divisions.

In contrast, the main positive contributions came from mining and quarrying (4.9 percent from -10.3 percent in Q1); finance, real estate and business services (1.9 percent from 1.1 percent); construction (2.3 percent from -1.9 percent) and utilities (2.1 percent from 0.2 percent).

Year-on-year, the economy expanded 0.4 percent in the second quarter of 2018, slowing from a 0.8 percent growth in the previous period and below market expectations of a 1 percent expansion. It was the weakest growth rate since the first quarter of 2016 when the economy contracted 0.3 percent.




Friday August 31 2018
South Africa Trade Balance Swings to Deficit in July
South African Revenue Service | Stefanie Moya | stefanie.moya@tradingeconomics.com

South Africa trade balance shifted to a ZAR 4.66 billion deficit in July of 2018 from a downwardly revised ZAR 11.89 billion surplus in the previous month and well below market consensus of a ZAR 5.4 billion surplus. It was the largest trade deficit since January, as exports fell while imports picked up. Considering the first seven months of the year, the country recorded a trade deficit of ZAR 6.51 billion.

Imports jumped 13.8 percent month-over-month to ZAR 111.7 billion in July of 2018, boosted by higher purchases of mineral products (23 percent); chemicals (17 percent); machinery and electronics (7 percent); vegetable products (88 percent) and base metals (17 percent). The most important import partners were: China (17.1 percent of total imports), Germany (9.9 percent), Saudi Arabia (7.2 percent); Nigeria (5.7 percent) and the US (5.4 percent).

Exports dropped 2.7 percent month-over-month to ZAR 107.1 billion, mostly due to lower sales of precious metals and stones (-19 percent); base metals (-5 percent) and other unclassified (-59 percent). On the other hand, sales rose for vegetable products (24 percent); machinery and electronics (8 percent) and mineral products (3 percent). Main export partners were: China (9.2 percent of total exports), the US (7.4 percent), Germany (6.4 percent), Japan (5.7 percent) and India (4.6 percent).

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade deficit of ZAR 11.53 billion in July.




Wednesday August 22 2018
South Africa Inflation Rate Edges Up to 5.1% in July
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa rose to 5.1 percent in July of 2018 from 4.6 percent in June and above market expectations of 5.0 percent. It was the highest inflation rate since September last year, boosted by cost of housing and utilities and transport.

Year-on year, prices increased further for housing and utilities (5.2 percent compared to 4.1 percent in June); transport (10.0 percent compared to 7.3 percent), namely fuel (25.3 percent compared to 16.3 percent) and household equipment (2.8 percent compared to 2.7 percent). Meanwhile, cost slowed for miscellaneous goods and services (5.7 percent compared to 6.2 percent); recreation and culture (0.4 percent compared to 0.6 percent); restaurants and hotels (4.2 percent compared to 4.5 percent) and health (4.4 percent compared to 4.7 percent). Also, inflation was steady for food and non-alcoholic beverages (3.4 percent, the same as in June); alcoholic beverages and tobacco (at 6.0 percent); clothing and footwear (at 1.8 percent); communication (at 1.1 percent) and education (at 6.7 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, advanced to 4.3 percent in July from 4.2 percent in June, in line with market consensus. Compared to June, core consumer prices picked up to 0.6 percent, following a 0.2 percent gain in the previous month.

On a monthly basis, consumer prices went up 0.8 percent, after rising 0.4 percent in June and slightly higher than forecasts of 0.7 percent.


Tuesday July 31 2018
South Africa Trade Surplus Largest in 6 Months
South African Revenue Service | Stefanie Moya | stefanie.moya@tradingeconomics.com

South Africa trade surplus widened to ZAR 12.0 billion in June of 2018 from an upwardly revised ZAR 3.84 billion in the previous month and well above market expectations of a ZAR 5.0 billion surplus. It was the largest trade surplus since December last year, as exports rose and imports fell. Considering the first half of the year, the country recorded a trade deficit of ZAR 1.79 billion.

Exports increased 7.1 percent month-over-month to ZAR 110.1 billion in June of 2018, driven by higher sales of precious metals and stonces (38.0 percent); base metals (13 percent) and vehicles and transport equipment (8 percent). In contrast, exports of mineral products fell (-6 percent). The most important export partners were: the UK (9.1 percent of total exports), China (7.9 percent), the US (7.0 percent), Germany (6.5 percent) and India (5.1 percent).

Imports dropped 0.9 percent month-over-month to ZAR 98.1 billion, mainly due to vegetable products (-51 percent); base metals (-9 percent) and machinery and electronics (-3 percent). On the other hand, higher purchases were recorded for mineral products (11 percent)n and original equipment components (15 percent). Main import partners were: China (17.5 percent of total imports), Germany (10.6 percent), the US (6.0 percent), Saudi Arabia (5.1 percent) and Nigeria (4.3 percent).

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade deficit of ZAR 4.69 billion in June.


Tuesday July 31 2018
South Africa Jobless Rate Rises to 27.2% in Q2
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The unemployment rate in South Africa increased to 27.2 percent in the second quarter of 2018 from 26.7 percent in the previous period. The number of unemployed rose by 103 thousand to 6.08 million while the number of employed fell by 90 thousand to 16.29 million.

The number of unemployed persons went up by 102 thousand to 6.08 million from 5.98 million in the first quarter of the year. Employment fell by 90 thousand to 16.29 million from 16.38 million in the previous period. Job losses ocurred in the informal sector (-73 thousand), formal (-35 thousand) and in agriculture (-3 thousand) while gains were recorded in private households (22 thousand).

The labour force grew by 12 thousand to 22.37 million from 22.35 million in the prior quarter and those detached from jumped by 141 thousand to 15.46 million from 15.32 million.

The expanded definition of unemployment, including people who have stopped looking for work, increased to 37.2 percent in the second quarter of 2018 from 36.7 percent in the first quarter.

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




Thursday July 19 2018
South Africa Leaves Monetary Policy Unchanged
SARB | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African Reserve Bank kept its benchmark repo rate steady at 6.5 percent on July 19th, 2018, as widely expected. Policymakers said the decision is appropriate and accommodative given the current state of the economy. The Committee noted a deterioration in the inflation outlook due to supply-side factors. Policymakers added that they will continue to monitor and will act if the inflation deviates from the target range.

Despite remaining within the target band 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. Thus far, the impact of the value-added tax (VAT) increase appears to have been less than anticipated. However, the weaker rand exchange rate and the higher oil price assumptions result in a more elevated inflation trajectory. Headline inflation is now expected to average 4.8% in 2018 (down from 4.9%) before increasing to 5.6% in 2019 and decreasing again to 5.4% in 2020 (up from 5.2% in both years). Headline CPI inflation is expected to peak at around 5.7% in the first and second quarters of 2019 before declining to 5.3% at the end of 2020. The forecast for core inflation is 4.6% in 2018 (up from 4.5%), 5.5% in 2019 and 5.3% in 2020 (up from 5.1% in both years).

Since the previous meeting of the MPC, the rand has depreciated by 7.2% against the US dollar, by 6.2% against the euro, and by 4.9% on a trade-weighted basis. At current levels, the SARB’s model assesses the rand to be undervalued. It is likely that the local currency, along with other emerging market currencies, will remain volatile. The implied starting point for the rand is R13.40 against the US dollar compared with R12.37 at the time of the previous MPC meeting. A key external risk to the rand remains the possibility of tighter global financial conditions. However, the pace of monetary policy normalisation in the advanced economies continues to be gradual. At this stage, further policy tightening by the United States (US) Federal Reserve (Fed) is expected to follow a measured path in the absence of significant inflation or growth surprises. Higher-than-expected US fiscal deficits could result in a stronger monetary policy response.

The domestic economic growth outlook for this year is weaker than we had expected in May. Following the broad-based contraction of 2.2% in the first quarter and early indications of modest growth in the second quarter, the SARB’s forecast now indicates a growth rate of 1.2% for 2018 compared with 1.7% previously. The forecast for 2019 is 1.9%, marginally higher than the previous forecast of 1.7%, while the forecast for 2020 is unchanged at 2.0%. At these growth rates, the negative output gap is wider in the near term but is still expected to close in 2020.

The MPC assesses the risks to the inflation forecast to be on the upside. A number of key risks and uncertainties highlighted in recent meetings persist. Electricity prices continue to pose a further upside risk. The growth forecast has deteriorated, and the outlook remains constrained. Demand pressures in the economy are not assessed to pose a risk to the inflation outlook. The MPC assesses the risks to the growth forecast to be more or less balanced. A firm commitment to credible structural policy initiatives and implementation is required to make a marked impact on employment and potential output.

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


Wednesday July 18 2018
South Africa Inflation Rate Rises to 6-Month High in June
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa increased to 4.6 percent in June of 2018 from 4.4 percent in the previous month and below market expectations of 4.8 percent. It was the highest inflation rate since December last year, mainly due to higher prices of transport.

Year-on year, cost advanced faster for transport (7.3 percent compared to 5.0 percent in May), namely fuel (16.3 percent compared to 9.4 percent) and household equipment (2.7 percent compared to 2.4 percent). In contrast, cost eased for housing and utilities (4.1 percent compared to 4.8 percent); recreation and culture (0.6 percent compared to 1.3 percent); alcoholic beverages and tobacco (6.0 percent compared to 6.2 percent) and clothing and footwear (1.8 percent compared to 1.7 percent). Also, prices slowed for restaurants and hotels (4.5 percent compared to 5.0 percent) and health (4.7 percent compared to 4.8 percent). Additionally, inflation was steady for food and non-alcoholic beverages (3.4 percent, the same as in May); miscellaneous goods and services (6.2 percent); communication (1.1 percent) and education (6.7 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, slowed to 4.2 percent in June from 4.4 percent in May, down from market consensus of 4.4 percent. Compared to May, core consumer prices went up 0.2 percent, after increasing 0.6 percent in the prior month.

On a monthly basis, consumer prices rose 0.4 percent, following a 0.2 percent in May and slightly lower than forecasts of 0.5 percent.