Thursday January 17 2019
South Africa Holds Interest Rate Steady at 6.75%
SARB | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African Reserve Bank left its benchmark repo rate unchanged at 6.75 percent on January 17th 2019 after hiking it by 25 bps in the previous meeting, as widely expected. Policymakers said the decision is accommodative and monetary policy actions will continue to focus on anchoring inflation near to the mid-point of the target range in the interest of sustainable growth. The Committee noted international developments including oil prices and the exchange rate depreciation as the key drivers of an improved inflation outlook.

Excerpts from the statement by Governor Lesetja Kganyago:

The near-term inflation forecast generated by the SARB’s Quarterly Projection Model (QPM) has improved significantly since the previous MPC. Headline inflation is now expected to average 4.6% in 2018 (down from 4.7%) and 4.8% in 2019 (down from 5.5%), before increasing to 5.3% in 2020 (down from 5.4%) and moderating to 4.8% in 2021. Headline CPI inflation is now expected to peak at around 5.6%, in the first quarter of 2020. Core inflation is expected remain unchanged at 4.3% in 2018 and forecast to average 5.0% in 2019 (down from 5.3%), 5.1% in 2020 (down from 5.5%) and 4.8% in 2021. These inflation projections are based on an interest rate path generated by the QPM.

Since the November MPC, the rand has appreciated by 1.4% against the US dollar, by 1.5% against the euro, and by 0.5% on a trade-weighted basis. The implied starting point for the rand is R14.30 against the US dollar, compared with R14.50 at the time of the previous meeting. At these levels, the QPM assesses the rand to be less undervalued.

The domestic growth outlook remains sluggish. Although, GDP increased by 2.2% in the third quarter of 2018, private sector fixed investment remains weak and production in key sectors is volatile. The SARB now expects growth in 2018 to have averaged 0.7% (up from 0.6% in November). The growth forecast for 2019 is 1.7% (down from 1.9%), it is unchanged at 2.0% for 2020 and increases to 2.2% in 2021. At these growth rates, the negative output gap is expected to close in the first quarter of 2021.

The MPC assesses the risks to the growth forecast to be on the downside. Weak business and consumer confidence continue to weigh on fixed capital formation. This could be exacerbated by the possibility of protracted electricity supply constraints. Prudent macroeconomic policies are essential to ensuring that growth is sustainable and the economy is more resilient to shocks. Furthermore, the Committee remains of the view that current challenges facing the economy are primarily structural in nature.The implementation of credible structural policy initiatives that make a marked impact on potential output and employment and lower the cost structure of the economy should be prioritised.

The MPC has taken note of the improved inflation outlook, especially in the near-term. Over the forecast period, inflation is expected to remain within the inflation target range, averaging 5.3% in 2020 and 4.8% in 2021.

The overall risks to the inflation outlook are assessed to be moderately on the upside. The risks include administered prices such as electricity and water tariffs, rising domestic food prices in the outer years, changing investor sentiment towards emerging markets, moderation in global growth and volatile international oil prices.

Against this backdrop, the MPC unanimously decided to keep the repurchase rate unchanged at 6,75% per year.




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

South Africa trade balance shifted to a ZAR 3.49 billion surplus in November of 2018 from a downwardly revised ZAR 4.29 billion deficit in the previous month and beating market expectations of a ZAR 2.25 billion gap. Considering the January to November period, the country recorded a ZAR 4.16 billion shortfall.

Imports dropped 8.4 percent month-over-month to ZAR 115.35 billion, mostly due to lower purchases of mineral products (-10 percent); chemical products (-9 percent); precious metals & stones (-56 percent); original equipment components (-23 percent) and vehicles & transport equipments (-9 percent). The most important import partners were: China (19.6 percent of total imports), Germany (9.5 percent), the US (6.4 percent), Saudi Arabia (4.8 percent) and Nigeria (3.9 percent).

Exports declined 2.3 percent month-over-month to ZAR 118.84 billion, mainly due to lower sales of vegetable products (-26 percent); prepared foodstuff (-9 percent) and vehicle & transport equipments (-13 percent). Meanwhile, sales increased for mineral products (2 percent) and chemicals (6 percent). Main export partners were: China (9.9 percent of total exports), Germany (8.5 percent), the US (7.0 percent), Japan (4.9 percent) and India (4.8 percent).

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade gap of ZAR 6.40 billion in November.




Wednesday December 12 2018
South Africa Inflation Rate at 1-1/2-Year High of 5.2%
Statistics South Africa | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The annual inflation rate in South Africa rose to 5.2 percent in November of 2018 from 5.1 percent in the previous month while markets had expected it to remain steady at 5.1 percent. It is the highest inflation rate since May 2017, as prices continued to climb mainly for transport.

Year-on-year, prices rose faster mainly for transport (10.7 percent from 10.5 percent in October), namely private transport operation (19.2 percent from 18.8 percent) amid rising cost of fuels (23.1 percent from 22.8 percent); and miscellaneous goods & services (5.5 percent from 5.4 percent), of which personal care (1.8 percent  from 0.8 percent). Additional upward pressure came from prices of: health (5.1 percent from 5.0 percent); alcoholic beverages & tobacco (4.8 percent from 4.2 percent); household contents and services (3.4 percent from 3.0 percent); recreation & culture (0.9 percent from 0.7 percent) and communication (1.4 percent from 1.2 percent).

On the other hand, inflation was steady for food & non-alcoholic beverages (3.4 percent); housing & utilities (5.2 percent) and education (6.7 percent). Also, cost slowed for restaurants & hotels (4.1 percent from 4.2 percent) and clothing & footwear (1.8 percent from 2.0 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, fuel and energy, rose to 4.4 percent in November 2018 from 4.2 percent in October and slightly above market consensus of 4.3 percent. It is the highest rate since May. Compared to the previous month, core consumer prices increased 0.2 percent, compared to a 0.1 percent gain in October and market expectations of a 0.1 percent rise.

On a monthly basis, consumer prices went up 0.2 percent, following a 0.5 percent rise in October and above market expectations of a 0.1 percent gain. Prices slowed mostly for transport (0.6 percent from 2.6 percent), due to fuels (1.1 percent from 6.1 percent) while they increased slightly for food & non-alcoholic beverages (0.4 percent from 0.3 percent), pushed up by cost of fruit (4.3 percent from 2.0 percent).




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.