Thursday January 16 2020
South Africa Unexpectedly Cuts Repo Rate to 6.25%
Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The South African Reserve Bank voted unanimously to trim its benchmark repo rate to 6.25 percent during its first policy meeting of 2020, while markets had expected it to be kept steady. It was the first rate cut since July, bringing borrowing costs to the lowest level since November 2015. The decision came amid lower inflation forecasts and the country's persistent economic vulnerability.

Excerpts from the statement by Governor Lesetja Kganyago:

The medium-term inflation outlook has been revised significantly lower compared to the November forecast. The inflation forecast generated by the SARB’s Quarterly Projection Model (QPM) averages 4.1% in 2019 (down from 4.2%), 4.7% for 2020 (down from 5.1%) and 4.6% for 2021 (down from 4.7%). The Bank’s forecast for headline CPI inflation for 2022 is 4.5%. Headline CPI inflation is now expected to peak at 4.9% in the final quarter of 2020 and settle at 4.5% in the third quarter of 2021 (one quarter earlier). The forecast for core inflation for 2019 is unchanged at 4.2%, is 4.3% in 2020 (down from 4.5%) and 4.4% in 2021 (down from 4.6%). The Bank’s forecast for core inflation for 2022 is 4.5%. Food price inflation continues to surprise to the downside on a monthly basis, and is revised from 5.8% to 4.7% for 2020. Inflation expectations have continued to moderate gradually. According to the Bureau for Economic Research (BER) fourth quarter survey, expectations for headline inflation are down slightly for 2019 to 4.5% (from 4.6%). Expectations for 2020 declined to 4.8% (from 5.0%) and to 5.0% (from 5.1%) for 2021. Five-year-ahead inflation expectations also eased to 4.9% (from 5.0%).

The GDP growth outcome for the third quarter confirmed that the economy remains weak and vulnerable to idiosyncratic shocks and poor sectoral performances. While growth in the fourth quarter is expected to have picked up, electricity supply constraints will likely keep economic activity muted in the near term. Public sector investment continues to be weak and export growth remains lacklustre, despite strong terms of trade. Government and household consumption, and private investment, continue to grow, albeit modestly. The forecast of GDP growth for 2019 is revised lower to 0.4% (from 0.5%). The forecasts for 2020 and 2021 have also decreased to 1.2% (from 1.4%) and 1.6% (from 1.7%), respectively, due to lower growth than previously expected in the third and fourth quarters. The GDP forecast for 2022 is 1.9%. 

The MPC assesses the risks to the growth forecast to be to the downside. Escalation in global trade tensions, geo-political risks, further domestic supply constraints and/or sustained higher oil prices could generate headwinds to growth. Public sector financing needs have risen, increasing risk premiums and pushing borrowing costs for the broader economy higher. Implementation of prudent macroeconomic policies and structural reforms that lower costs and increase investment, potential growth and job creation, remains urgent. The overall risks to the inflation outlook are assessed to be balanced. Demand side pressures remain subdued and house rental prices are expected to increase at only moderate rates. Global inflation should also remain low. 

Monetary policy actions will continue to focus on anchoring inflation expectations near the mid-point of the inflation target range in the interest of balanced and sustainable growth. In this persistently uncertain environment, future policy decisions will continue to be highly data-dependent, sensitive to the balance of risks to the outlook, and will seek to look-through temporary price shocks. The implied path of policy rates over the forecast period generated by the Quarterly Projection Model indicated two repo rate cuts of 25 basis points each in the first and fourth quarters of 2020. This remains a broad policy guide which could change in either direction from meeting to meeting in response to new developments and changing data and risks.





Friday December 27 2019
South Africa Trade Surplus Larger than Forecast
South African Revenue Service | Joana Ferreira | joana.ferreira@tradingeconomics.com

South Africa's trade surplus widened to ZAR 6.10 billion in November 2019 from a downwardly revised ZAR 2.75 billion in the previous month and above market expectations of ZAR 5.00 billion.

Imports plunged 7.7 percent from a month earlier to ZAR 110.80 billion in November, due to lower purchases of original equipment components (-44 percent), chemical products (-12 percent), prepared foodstuff (-12 percent), and machinery & electronics (-3 percent). On the other hand, vehicles & transport equipment imports rose 9 percent. The main sources of imports were China (10.1 percent of total imports), Germany (8.6 percent), the US (7.3 percent), the UK (5.5 percent) and India (5.1 percent).

Exports declined at a softer 4.8 percent to ZAR 116.90 billion, as sales fell for mineral products (-4 percent), vehicles & transport equipment (-5 percent), vegetable products (-15 percent), machinery & electronics (-8 percent), and base metals (-5 percent). Sales to China accounted for 19.2 percent of total exports. This was followed by Germany (7.8 percent), the US (6.5 percent), India (5.5 percent) and Nigeria (5.0 percent).

From January to November, South Africa recorded a ZAR 10.54 billion surplus, compared to a ZAR 1.24 billion deficit in the same period last year.




Wednesday December 11 2019
South Africa Inflation Rate Falls to Near 9-Year Low
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa decreased to 3.6 percent in November 2019 from 3.7 percent in the previous month, matching market expectations. It was the lowest inflation rate since December 2010, mainly due to a slowdown in cost of food & non-alcoholic beverages and a fall in transport prices.

Year-on-year, prices eased for food & non-alcoholic beverages (3.5 percent compared to 3.6 percent in October); household contents and services (2.9 percent compared to 3 percent); and alcoholic beverages & tobacco (5.1 percent compared to 5.7 percent). Also, cost of transport dropped (-0.3 percent compared to 0.3 percent), namely fuels (-6.6 percent compared to -4.9 percent). 

On the other hand, prices advanced further for recreation & culture (1.3 percent compared to 1.1 percent); restaurants & hotels (3.2 percent compared to 3.1 percent); and clothing & footwear (2.3 percent compared to 2.2 percent). In addition inflation was steady for housing & utilities (at 4.8 percent); miscellaneous goods & services (at 5.7 percent); education (at 6.7 percent); and health (at 4.8 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, fuel and energy, was at 3.9 percent in November, slowing from a 4 percent gain in the prior month, in line with forecasts and reaching its lowest since December 2011.

On a monthly basis, consumer prices rose 0.1 percent, after being unchanged in October. Cost food & non-alcoholic beverages rebounded (0.3 percent compared to -0.1 percent ) while transport prices were flat, following a 0.3 percent increase in the previous month.




Tuesday December 03 2019
South Africa GDP Unexpectedly Shrinks 0.6% QoQ
Statistics South Africa | Joana Taborda | joana.taborda@tradingeconomics.com

The South African economy contracted an annualized 0.6 percent on quarter in the three months to September of 2019, following an upwardly revised 3.2 percent growth in the previous period and much worse than market expectations of a 0.1 percent expansion. Mining, manufacturing and transport, storage and communication industries contributed the most to the GDP contraction.

The mining sector shrank 6.1 percent, following a 17.4 percent jump in Q2, mainly due to lower output for platinum group metals (PGMs), coal and iron ore. Manufacturing slumped 3.9 percent (+2.1 percent in Q2), mainly due to a drop in production of basic iron and steel, non-ferrous metal products, metal products and machinery; petroleum, chemical products, rubber and plastic products; and wood and wood products, paper, publishing and printing.

The transport, storage and communication industry fell 5.4 percent, the third straight quarter of contraction (-0.3 percent in Q2), as a result of decreases in both land transport and transport support services.

Other declines were also recorded for construction (-2.7 percent vs -1.4 percent), namely residential buildings, non-residential buildings and construction works; agriculture, forestry and fishing (-3.6 percent vs -4.2 percent), namely field crops; and electricity, water and gas (-4.9 percent vs 2.1 percent), largely due to a decrease in electricity distributed. The state-owned Eskom which produces more than 90 percent of the power in South Africa, has been implementing several protracted power cuts due to technical faults and financial issues. 

On the other hand, increases were seen for trade, catering and accommodation (2.6 percent vs 3.4 percent), namely wholesale trade; finance, real estate and business (1.6 percent vs 4.1 percent), namely financial intermediation, auxiliary activities, real estate activities and business services; general government (2.4 percent vs 3.2 percent), mainly due to increased employment in provincial government and higher education institutions; and personal services (0.4 percent vs 0.8 percent).

Year-on-year, the economy expanded a meagre 0.1 percent, below 0.9 percent in Q2 and forecasts of 0.4 percent. Year-to-date, the GDP advanced 0.3 percent but the South African Treasury expects it to grow 0.5 percent in 2019.




Tuesday December 03 2019
South Africa Economy Barely Grows in Q3
Statistics South Africa | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The South African GDP advanced 0.1 percent year-on-year in the third quarter of 2019, after expanding 0.9 percent in the previous period and missing market expectations of a 0.4 percent growth. Further nationwide power blackouts hit primarily utilities, manufacturing, mining, agriculture and construction.

A series of breakdowns in Eskom's power plants caused another wave of nationwide power blackouts during the period. As a result, contractions were seen in electricity, gas and water (-2.4 percent vs -0.5 percent in Q2); agriculture (-8.9 percent vs -6.7 percent); construction (-3.1 percent vs -2.3 percent); mining (-0.7 percent vs -1.4 percent); manufacturing (-1.4 percent vs 0.5 percent) and transport, storage & communication (-1 percent vs 2.5 percent). Also, output advanced at a slower pace for finance, real estate and business services (2.3 percent vs 3.1 percent).

Meanwhile, activity rose faster for trade, catering and accommodation (0.6 percent vs 0.4 percent); general government services (1.8 percent vs 1.7 percent) and personal services (1.3 percent vs 0.8 percent).

On a seasonally adjusted quarterly basis, the economy contracted an annualized 0.6 percent on quarter in the three months to September of 2019, following an upwardly revised 3.2 percent growth in the previous period and much worse than market expectations of a 0.1 percent expansion. Mining, manufacturing and transport, storage and communication industries contributed the most to the GDP contraction.





Friday November 29 2019
South Africa Trade Surplus Narrows in October
South African Revenue Service | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

South Africa's trade surplus shrank to ZAR 3.09 billion in October 2019 from a downwardly revised ZAR 4.53 billion in the previous month and against market expectations of a deficit of ZAR 1.60 billion. Imports climbed 13.7 percent, mainly due to mineral products and exports rose at a softer 11.9 percent, primarily boosted by precious metals & stones.

Imports picked up 13.7 percent month-over-month to ZAR 120.26 billion in October, due to higher acquisitions of mineral products (58 percent); original equipment components (19 percent); chemical products (14 percent) and machinery & electronics (4 percent). In contrast, purchases slipped for vegetable products (-34 percent). Among major trade partners, imports rose from China (18.6 percent), Germany (10.1 percent), the US (7 percent), India (4.8 percent) and Nigeria (3.9 percent).

Exports rose 11.9 percent from a month earlier to ZAR 123.35 billion, boosted by shipments of precious metals & stones (36 percent); mineral products (8 percent); base metals (14 percent) and machinery & electronics (15 percent). Meanwhile, overseas sales tumbled for vegetable products (-39 percent). Among major trade partners, exports were up to China (10.1 percent), Germany (9.1 percent), the US (6.8 percent), Mozambique (5 percent) and the UK (4.7 percent).

Considering the first ten months of the year, the country's trade balance shifted to a surplus of ZAR 5.32 billion compared to a deficit of ZAR 3.70 billion, as exports grew 5.1 percent to ZAR 1,079.72 billion while imports went up 4.2 percent to ZAR 1,074.40 billion. 

Excluding trade with neighbouring Botswana, Lesotho, Namibia and Swaziland, the country's trade shortfall widened to ZAR 6.45 billion in October 2019 from an upwardly revised ZAR 3.54 billion in a month earlier. Imports surged 14.3 percent to ZAR 115.82 percent whereas exports rose 11.8 percent to ZAR 109.37 billion.


Thursday November 21 2019
South Africa Leaves Interest Rate Unchanged at 6.5%
SARB | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The South African Reserve Bank held its benchmark repo rate unchanged at 6.50 percent during its November meeting, as widely expected. The decision was not unanimous. Policymakers noted that monthly inflation has been lower than the mid-point of the target range and that inflation expectations have continued to moderate gradually. Meantime, economic activity in Q3 is expected to be weak as suggested by mining and manufacturing short-term indicators. Looking ahead, the SARB disclosed that projections point to one repo cut of 25 basis points in Q3 2020, but this direction is dependent on new developments and changing data and risks.

Excerpts from the statement by Governor Lesetja Kganyago:

The medium-term inflation outlook is largely unchanged since September. The inflation forecast generated by the SARB’s Quarterly Projection Model (QPM) is unchanged compared to September, averaging 4.2% in 2019, 5.1% for 2020 and 4.7% for 2021. Headline CPI inflation is expected to peak at 5.3% in the first quarter of 2020 and settle at 4.5% in the last quarter of 2021. The forecast for core inflation is lower at 4.2% in 2019 (down from 4.3%), at 4.5% in 2020 (down from 4.7%) and remains steady at 4.6% in 2021. Food price inflation continues to surprise to the downside on a monthly basis, and is expected to peak at about 6.1% in the third quarter of 2020. Inflation expectations have continued to moderate gradually. According to the Bureau for Economic Research (BER) third quarter survey, expectations for headline inflation are down slightly for 2019 to 4.6% (from 4.8%). Expectations for 2020 remain unchanged at 5.0% and eased from 5.2% to 5.1% for 2021, reaching the lowest levels since 2007. Five-year-ahead inflation expectations also declined to 5.0% (from 5.1%).

Although GDP growth rebounded to 3.1% in the second quarter, longer term weakness in most sectors remains a serious concern. Based on recent short term economic indicators for the mining and manufacturing sectors, the third quarter GDP outcome is expected to be weak. Public sector investment has declined, export growth remains low, whereas government and household consumption continue to grow, albeit modestly. The forecast of GDP growth for 2019 is revised lower at 0.5% (from 0.6%). The forecasts for 2020 and 2021 have decreased to 1.4% (from 1.5%) and 1.7% (from 1.8%), respectively, due to lower growth than previously expected in the third and fourth quarters and downward revisions to global growth.

The MPC assesses the risks to the growth forecast to be to the downside. Escalation in global trade tensions, geo-political risks, further domestic supply constraints and/or sustained higher oil prices could generate headwinds to growth. Public sector financing needs have risen, raising the prospect of further pressure on the currency and pushing borrowing costs for the broader economy higher. Implementation of prudent macroeconomic policies and structural reforms that lower costs and increase investment, potential growth and job creation, remains urgent.

The overall risks to the inflation outlook are assessed to be balanced, but uncertainty about inflation risks is unusually high. Demand side pressures remain subdued and house rental prices are expected to increase at only moderate rates. Global inflation should also remain low. Food price inflation has continued to surprise to the downside, but rising imported food prices and uncertain domestic weather patterns raise uncertainty about the future price trajectory. Further upside risks to the inflation outlook include wage growth and fuel, electricity and water prices. The risk of further capital flow volatility has also increased, which could put pressure on the exchange rate.

Monetary policy actions will continue to focus on anchoring inflation expectations near the mid-point of the inflation target range in the interest of balanced and sustainable growth. In this persistently uncertain environment, future policy decisions will continue to be highly data-dependent, sensitive to the balance of risks to the outlook, and will seek to look-through temporary price shocks. The Quarterly Projection Model indicated one repo cut of 25 basis points in the third quarter of 2020.



Wednesday November 20 2019
South Africa Inflation Rate Falls to Over 8-1/2-Year Low
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa fell to 3.7 percent in October 2019 from 4.1 percent in the previous month and below market expectations of 3.9 percent. It was the lowest inflation rate since February 2011, amid a slowdown in cost of transport and food & non-alcoholic beverages.

Year-on-year, prices eased for food & non-alcoholic beverages (3.6 percent from 3.9 percent in September); transport (0.3 percent from 2.4 percent), mainly due to fuels (-4.9 percent from 0.2 percent) and purchase of vehicles (3.4 percent from 3.7 percent); recreation & culture (1.1 percent from 1.4 percent); alcoholic beverages & tobacco (5.7 percent from 6.2 percent); household contents and services (3 percent from 3.2 percent); and restaurants & hotels (3.1 percent from 3.3 percent).

Meanwhile, inflation was steady for housing & utilities (at 4.8 percent); miscellaneous goods & services (at 5.7 percent); clothing & footwear (at 2.2 percent); and education (at 6.7 percent). In addition, cost of health rose further (4.8 percent from 4.6 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, fuel and energy, was at 4 percent in October, unchanged from the previous month and matching market forecasts. It remained the lowest rate since December 2011.

On a monthly basis, consumer prices were unchanged, after increasing 0.3 percent in September and below consensus of a 0.2 percent gain. Cost food & non-alcoholic beverages went down (-0.1 percent from 0.3 percent) while transport prices advanced at a faster pace (0.3 percent from 0.2 percent).


Thursday October 31 2019
South Africa Trade Surplus Widens in September
South African Revenue Service | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

South Africa's trade surplus rose to ZAR 5.16 billion in September of 2019 from a donwardly revised ZAR 4.54 billion in the previous month and beating market expectations of a ZAR 2 billion surplus. Imports declined at a faster 8.6 percent, mainly due to mineral products while exports shrank 7.8 percent amid lower sales registered in all categories.

Imports slipped 8.6 percent month-over-month to ZAR 105.27 billion in September, dragged down by lower purchases of mineral products (-23 percent); machinery & electronics (-10 percent); original equipment components (-17 percent) and vehicles & transport equipments (-11 percent). In contrast, acquisitions rose for vegetable products (46 percent). Purchases went down from Asia (-4.6 percent); Europe (-9.3 percent), America (-24 percent) and Oceania (-44.5 percent), while grew slightly from Africa (1.2 percent).

Exports decreased at a slower 7.8 percent from a month earlier to ZAR 110.44 billion, as shipments fell for all categories, namely mineral products (-10 percent); vehicles & transport equipments (-11 percent); vegetable products (-17 percent); machinery & electronics (-15 percent) and base metals (-5 percent). Overseas sales declined to Asia (-6.9 percent), Europe (-11.9 percent), Africa (-4.6 percent) and America (-10.4 percent), but rose to Oceania (16.1 percent).

Considering the first nine months of the year, the country's trade surplus widened to ZAR 2.51 billion from ZAR 1.76 billion, as exports grew at a faster 5.4 percent to ZAR 956.27 billion  while imports advanced 5.3 percent to ZAR 953.76 billion.

Excluding trade with neighbouring Botswana, Lesotho, Namibia and Swaziland, the country's trade shortfall narrowed to ZAR 2.94 billion in September from an upwardly revised ZAR 4.29 billion in a month earlier. Imports sank 9.4 percent to ZAR 100.88 billion while exports fell at a softer 8.5 percent to ZAR 97.94 billion.


Tuesday October 29 2019
South Africa Jobless Rate Steady at Over 11-Year High
Statistics South Africa | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The unemployment rate in South Africa edged up to 29.1 percent in the Q3 2019, its highest level since comparable data began in Q1 2008, matching market expectations. The number of unemployed rose by 78 thousand to 6.73 million while employment increased by 62 thousand to 16.38 million.

The number of unemployed advanced by 78 thousand to 6.73 million from 6.65 million in the second quarter of the year. Employment rose by 62 thousand to 16.38 million from 16.31 million in the previous period. Total employment went up in four of the ten industries, primarily in the community and social services industry (+56 thousand), followed by agriculture and mining (+38 thousand each) and private households (+35 thousand). In contrast, job cuts were seen in manufacturing (-30 thousand), construction (-24 thousand), trade (-21 thousand) and utilities (-18 thousand). More jobs were added in the formal sector (+43 thousand) while there was a decline in those in the informal sector (-53 thousand).

The labour force also increased by 141 thousand to 23.11 million from 22.97 million in the previous quarter and those detached from it went up by 9 thousand to 15.47 million from 15.46 million.

The expanded definition of unemployment, including people who have stopped looking for a work, stood at 38.5 percent, unchanged from the preceding quarter.

By genders, the jobless rate went up for men (27.7 percent from 27.1 percent in Q2) while it decreased for women (30.9 percent vs 31.3 percent). Also, the youth unemployment rate rose significantly to 58.2 percent from 56.4 percent in the previous period, reaching its highest level since the first quarter of 2008. 

A year earlier, the jobless rate was lower at 27.5 percent.