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.




Friday June 29 2018
South Africa Trade Surplus Widens in May
South African Revenue Service | Stefanie Moya | stefanie.moya@tradingeconomics.com

South Africa trade surplus increased to ZAR 3.52 billion from aun upwardly revised ZAR 1.17 billion in the previous month and below market expectations of a ZAR 5.9 billion surplus. Considering the January to May period, the country posted a trade deficit of ZAR 17.77 billion.

Exports jumped 16.0 percent month-over-month to ZAR 102.6 billion in May of 2018, boosted by vegetable products (56 percent); prepared foodstuff (32 percent); vehicles and transport equipment (29 percent); chemicals (28 percent) and mineral products (11 percent). Main export partners were:  China (9.4 percent of total exports), Germany (7.7 percent), the US (6.6 percent), the UK (5.4 percent) and India (5.3 percent).

Imports advanced 13.5 percent month-over-month to ZAR 99.1 billion, driven by higher purchases of vegetable products (135 percent); vehicle and transport equipment (26 percent); base metals (25 percent); original equipments components (15 percent) and machinery and electronics (9 percent). The most important import partners were: China (18.8 percent of total imports), Germany (10.1 percent), the US (5.7 percent), Nigeria (4.8 percent) and India (4.2 percent).

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country recorded a trade deficit of ZAR 4.65 billion in May.




Wednesday June 20 2018
South Africa Inflation Rate Eases to 4.4% YoY in May
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa fell to 4.4 percent in May of 2018 from 4.5 percent in the previous month and below market consensus of 4.6 percent. The slowdown in inflation rate was mainly due to lower prices of food and non-alcoholic drinks.

Year-on year, prices rose at a softer pace for food and non-alcoholic beverages (3.4 percent compared to 3.9 percent in April), namely processed food (2.1 percent compared to 3.4 percent); recreation and culture (1.3 percent compared to 1.4 percent) and household equipment (2.4 percent compared to 2.6 percent). On the other hand, cost increased faster for miscellaneous goods and services (6.2 percent compared to 6.1 percent); alcoholic beverages and tobacco (6.2 percent compared to 6.0 percent); clothing and footwear (1.7 percent compared to 1.6 percent); restaurants and hotels (5.0 percent compared to 4.3 percent) and communication (1.1 percent compared to 1.0 percent). Additionally, inflation was steady for housing and utilities (4.8 percent, the same as in April); transport (5.0 percent); education (6.7 percent) and health (4.8 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, eased to 4.4 percent in May from 4.5 percent in April, missing market expectations of 4.5 percent. Compared to April, core consumer prices was unchanged, after rising 0.6 percent in the previous month.

On a monthly basis, consumer prices increased 0.2 percent, slowing from a 0.8 percent gain in the previous month and down from market consensus of 0.3 percent.


Tuesday June 05 2018
South Africa GDP Contracts the Most since 2009
Statistics South Africa | Joana Taborda | joana.taborda@tradingeconomics.com

The South African economy shrank a seasonally adjusted annualized 2.2 percent on quarter in the first three months of 2018, reversing from a 3.1 percent growth in the previous period which was the highest in 1-1/2 years. It compares with market expectations of a 0.5 percent decline. It is the biggest contraction since the first quarter of 2009 as production declined mostly for field crops, horticultural products, platinum group metals, iron ore and steel.

The biggest downward contributions came from mining, manufacturing and agriculture.

The mining sector went down 9.9 percent, extending the 4.4 percent drop in Q4 and mainly due to lower production of gold and ‘other’ metal ores, mainly platinum group metals and iron ore.

Manufacturing decreased 6.4 percent, the biggest drop since Q2 2015 and reversing from a 4.3 percent gain in Q4. Six of the ten manufacturing divisions shrank, with the largest downward contributions coming from basic iron and steel, non-ferrous metal products, metal products and machinery, petroleum, chemical products, rubber and plastic products.

The agriculture, forestry and fishing industry slumped 24.2 percent, reversing from a 37.5 percent growth in Q4, mainly because of a drop in production of field crops and horticultural products.

The trade, catering and accommodation sector declined 3.1 percent after a 4.8 percent jump in Q4 and construction decreased by 1.9 percent after a 1.4 percent decrease in Q4, marking the fifth straight quarter of falls. Decreases were reported for residential buildings and construction works.

The electricity, gas and water industry contracted by 0.5 percent after a 3.3 percent growth in Q4 and largely due to lower electricity production.

On the other hand, main positive contributions came from finance, real estate and business services (activities up 1.1 percent compared to 2.5 percent in Q4) and government (1.8 percent compared to 1.4 percent). 

Year-on-year, the economy grew 0.8 percent, easing from a 1.5 percent expansion in the previous period and well below forecasts of a 1.9 percent rise. It is the lowest annual growth rate since the second quarter of 2016.




Tuesday June 05 2018
South Africa GDP Growth Slows to 0.8% YoY in Q1
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African economy grew 0.8 percent year-on-year in the first quarter of 2018, easing from a 1.5 percent expansion in the previous period and below market expectations of 1.9 percent. It was the weakest growth rate since the second quarter of 2016, mainly due to a contraction in agriculture, forestry and fishing activities and mining.

Slower growth rates were seen for manufacturing (0.6 percent compared to 2.5 percent in Q4 2017) and elecricity, gas and water (1.2 percent compared to 1.9 percent). Additionally, output dropped for agriculture (-8.5 percent compared to 1.1 percent) and mining (-0.7 percent compared to 4.9 percent).

On the other hand, higher growth rates were recorded for transport, storage and communication (1.8 percent compared to 1.6 percent); personal services (1.3 percent compared to 0.8 percent);  government services (0.5 percent compared to 0.1 percent) and trade, catering and accommodation (0.3 percent compared to 0.1 percent). Also, finance, real estate and business services continued to rise (2.1 percent, the same pace as in Q4 2017) and construction fell at a softer pace (-0.7 percent compared to -1.2 percent).

On a seasonally adjusted quarterly basis, the economy shrank 2.2 percent, reversing from a 3.1 percent growth in the previous period and missing market consensus of a 0.5 percent contraction. The main contributors to the drop were field crops, horticultural products, platinum group metals and iron ore. 




Thursday May 31 2018
South Africa Trade Surplus Narrows Sharply in April
South African Revenue Service | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

South Africa trade surplus decreased to ZAR 1.14 billion in April of 2018 from a downwardly revised ZAR 9.30 billion in the prior month, missing market expectations of a ZAR 3.7 billion surplus. Considering the January to April period, the country recorded a trade deficit of ZAR 17.6 billion.

Exports went down 9.8 percent month-over-month to ZAR 88.5 billion in April of 2018, dragged down by lower sales of vehicles and transport equipment (-19 percent); base metals (-11 percent); mineral products (-5 percent); precious metals and stones (-7 percent) and chemical products (-15 percent). The most important export partners were: China (9.8 percent of total exports), the US (6.6 percent), Germany (6.5 percent), India (5.2 percent) and Japan (4.7 percent).

Imports declined 1.6 percent month-over-month to ZAR 87.4 billion, mostly due to lower purchases of base metals (-17 percent); textiles (-17 percent); chemical products (-4 percent) and vehicles and transport equipment (-4 percent). In contrast, imports increased for mineral products (9 percent). Main import partners were: China (16.4 percent of total imports), Germany (9.6 percent), Saudi Arabia (6.7 perent) and the US (6.3 percent).

Excluding trade with neighboring Botswana, Lesotho, Namibia and Swaziland, the country posted a trade deficit of ZAR 6.2 billion in April.


Thursday May 24 2018
South Africa Holds Interest Rate Steady at 6.5%
SARB | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African Reserve Bank left its benchmark repo rate unchanged at 6.5 percent on May 24th 2018 after trimming it by 25 bps in the previous meeting and matching market expectations. Policymakers said that the current monetary policy stance is accommodative and appropiate given the current state of the economy and the inflation trajectory. The Committee added that it will closely monitor that the inflation remains within the inflation target rate and will adjust the policy stance if necessary.

Excerpts from the statement by Governor Lesetja Kganyago:

The headline inflation forecast of the SARB is more or less unchanged since the previous meeting of the Monetary Policy Committee (MPC), despite the upward adjustments to the international oil price assumption and the weaker starting point for the trade-weighted exchange rate. The impact of these adjustments on the inflation forecast was offset in part by a lower food price forecast and a lower starting point. This follows a succession of downside surprises in core goods and food price outcomes. The forecasts for 2018 and 2019 are unchanged at 4.9% and 5.2% respectively, while the forecast for 2020 is marginally higher at 5.2% compared with 5.1% previously. The peak of 5.5% is still expected in the first quarter of 2019 before the impact of the VAT increase largely dissipates. The forecast for core inflation is marginally lower, at 4.5% for 2018, but has deteriorated somewhat more than headline inflation in the coming two years, to 5.1% in both years, from 4.9% previously. A peak of 5.2% is expected in the first quarter of 2019.

The implied starting point for the rand in the forecast is R12.37 against the US dollar compared with R11.97 at the time of the previous MPC meeting. Food prices, by contrast, are expected to increase by 4.9% in 2018 and by 5.5% in 2019, lower than in the previous forecast. There is a degree of uncertainty regarding the likely impact of the VAT increase and the sugar tax on food, and the extent to which these increases will be absorbed by manufacturers and retailers.

Since the previous meeting of the MPC, the rand has depreciated significantly, against the US dollar in particular, reversing much of the overvaluation seen at that time. Since then, the rand has depreciated by 6.0% against the US dollar, by 0.7% against the euro, and by 2.8% on a trade-weighted basis. In the near term, the rand is expected to remain volatile, with movements dominated by the changing assessment of these global trends. Domestically, an expected moderate widening of the current account deficit, a result of deteriorating terms of trade, could also weigh on the rand.

The domestic growth outlook remains challenging, although growth is still expected to outperform recent year outcomes. This is despite the possibility of a contraction in GDP in the first quarter of this year, following negative growth in both the mining and the manufacturing sectors. The SARB’s forecast for GDP growth is unchanged at 1.7% for 2018, but has been revised up from 1.5% to 1.7% for 2019. The forecast for 2020 is unchanged at 2.0%. The forecast remains consistent with a closing of the negative output gap by 2020, but at a slightly faster pace than before. The continued increase in the composite leading business cycle indicator confirms the upward momentum in the economy.

In contrast with the previous meeting, the MPC assesses the risks to the inflation forecast to have moved to the upside. This change is mainly due to global developments. A key uncertainty relates to the outlook for the dollar, which has appreciated against most currencies. Oil prices also pose an upside risk to the inflation forecast. Current spot prices are significantly above the levels assumed in the Quarterly Projection Model. Furthermore, a slight moderation in prices followed by a flat trajectory is assumed in the coming two years. There may be a degree of upside risk to this assumption.

In light of the change in the balance of risks to the inflation outlook, the MPC unanimously decided to keep the repurchase rate unchanged at 6.5% per annum. 


Wednesday May 23 2018
South Africa Inflation Rate Rises to 4-Month High in April
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa rose to 4.5 percent in April of 2018 from 3.8 percent in the previous month and below market expectations of 4.7 percent. It was the highest inflation rate since December last year, mainly due to prices of food and non-alcoholic beverages and housing and utilities.

Year-on year, prices increased faster for food and non-alcoholic beverages (3.9 percent compared to 3.5 percent in March), mostly due to processed food (3.4 percent compared to 2.7 percent) and housing and utilities (4.8 percent compared to 4.6 percent). In addition, cost advanced futher for transport (5.0 percent compared to 2.8 percent), namely fuel (9.0 percent compared to 2.9 percent); alcoholic beverages and tobacco (6.0 percent compared to 5.2 percent); recreation and culture (1.4 percent compared to 0.3 percent) and household equipment (2.6 percent compared to 2.0 percent). Also, prices continued to rise for clothing and footwear (1.6 percent compared to 1.5 percent) and restaurants and hotels (4.3 percent compared to 2.8 percent) and cost of communication rebounded (1.0 percent compared to -1.0 percent). On the other hand, cost eased for miscellaneous goods and services (6.1 percent compared to 6.2 percent) and health (4.8 percent compared to 5.1 percent) while inflation was steady for education (6.7 percent, the same as in March). 

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, petrol and energy, went up 4.5 percent in April from 4.1 percent in March, matching market consensus. Compared to February, core consumer prices advanced 0.6 percent, slowing from a 0.7 percent in the prior month.

On a monthly basis, consumer prices edged up 0.8 percent, compared to a 0.4 percent gain in March, and in line with market expectations.


Tuesday May 15 2018
South Africa Jobless Rate Steady at 26.7% in Q1
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

South Africa's unemployment rate came in at 26.7 percent in the first quarter of 2018, unchanged from the previous period. The number of unemployed increased by 100 thousand to 5.98 million and the number of employed rose by 207 thousand to 16.38 million.

The number of unemployed persons jumped by 100 thousand to 5.98 million from 5.88 nillion in the fourth quarter of 2017. Employment grew by 207 thousand to 16.38 million from 16.17 million in the prior period. Jobs gains occurred in formal sector (111 thousand), informal (93 thousand) and in private household (5 thousand) while losses were recorded in agriculture (-3 thousand).

The labour force edged up by 307 thousand to 22.36 million from 22.05 million in the fourth quarter and those detached from it declined by 154 thousand to 15.32 million from 15.47 million.

The expanded definition of unemployment, including people who have stopped looking for work, rose to 36.7 percent in the first quarter of the year from 36.3 percent in the previous quarter.

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