Wednesday July 31 2019
South Africa Trade Surplus Widens in June
South African Revenue Service | Agna Gabriel | agna.gabriel@tradingeconomics.com

The trade surplus in South Africa rose to ZAR 4.42 billion in June of 2019 from a downwardly revised ZAR 1.70 billion in the previous month. Exports fell 3.2 percent from a month earlier while imports declined at a faster 5.8 percent.

Exports dropped 3.2 percent month-over-month to ZAR 108.17 billion in June, dragged by lower sales of chemicals products (-21 percent); base metals (-7 percent) and machinery & electronics (-7 percent). On the other hand, shipments of vegetables products (+13 percent) and wood pulp & paper products (+65 percent) increased. The most important export partners were China (11.3 percent of total sales), Germany (7.0 percent), the US (6.6 percent), the UK (5.2 percent) and India (4.8 percent).

Meantime, imports slumped 5.8 percent from a month earlier to ZAR 103.75 billion, as purchases fell for machinery & electronics (-15 percent); chemical products (-14 percent); vehicles & transport equipment (-12 percent) and base metals (-12 percent) while imports of mineral products went up 11 percent. Main import partners were China (17.0 percent of total purchases), Germany (10.4 percent), the US (6.0 percent), Nigeria (5.9 percent) and Saudi Arabia (5.3 percent).

Excluding trade with neighbouring Botswana, Lesotho, Namibia and Swaziland, the country's trade gap was ZAR 3.71 billion. Exports decreased 2.4 percent to ZAR 96.59 billion and imports went down 5.7 percent to ZAR 100.30 billion. 




Tuesday July 30 2019
South Africa Jobless Rate Highest since 2003
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The unemployment rate in South Africa increased to 29 percent in the second quarter of 2019 from 27.6 in the previous period. It was the highest jobless rate since the first quarter of 2003, as the number of unemployed rose by 455 thousand to 6.65 million and employment rose by 21 thousand to 16.31 million.

The number of unemployed advanced by 455 thousand to 6.65 million from 6.20 million in the first quarter of the year. Employment went up by 21 thousand to 16.31 million from 16.29 million in the prior period. Job losses were recorded in the formal sector (-49 thousand) and private households (-49 thousand) while gains ocurred in the informal sector (+114 thousand) and agriculture (+5 thousand).

The labour force also increased by 476 thousand to 22.97 miliion from 22.49 million in the previous quarter and those detached from it rose by 3 thousand to 15.47 million from 15.79 million.

The expanded definition of unemployment, including people who have stopped looking for work, went up to 38.54 percent in the second quarter of 2019 from 38 percent in the first quarter. 

By genders, the jobless rate advanced for both women (31.3 percent from 29.3 percent in Q1) and men (27.12 percent from 26.1 percent). Also, the youth unemployment rate continued to rise to 56.4 percent from 55.2 percent in the prior period.

A year earlier, the jobless rate was lower at 27.2 percent. 




Wednesday July 24 2019
South Africa June Inflation Rate Steady at 4.5%
Statistics South Africa | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in South Africa was at 4.5 percent in July 2019, unchanged from the previous month and slightly above market expectations of 4.4 percent. Prices of food & non-alcoholic beverages and housing & utilities rose further while cost of transport eased.

Year-on-year, inflation was steady for miscellaneous goods & services (at 5.4 percent, the same as in May); clothing & footwear (at 1.9 percent) and education (at 6.7 percent). Meantime, prices advanced at a faster pace for food & non-alcoholic beverages (3.7 percent from 3.2 percent in May), namely processed (5.4 percent from 4.8 percent) and unprocessed (1.5 percent from 1.3 percent); housing & utilities (4.9 percent from 4.5 percent); recreation & culture (0.9 percent from 0.4 percent); restaurants & hotels (3.5 percent from 3.2 percent); health (5.3 percent from 5.2 percent); and alcoholic beverages & tobacco (6.1 percent from 5.6 percent). Also, cost of communication fell less (-0.3 percent from -0.5 percent). On the other hand, cost eased for transport (5.5 percent from 7.1 percent), of which fuels (7.4 percent from 11.6 percent); and household contents and services (3.1 percent from 3.3 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, fuel and energy, increased to 4.3 percent in June from an over 1-year low of 4.1 percent in May and in line with market consensus.

On a monthly basis, consumer prices went up 0.4 percent, after rising 0.3 percent in the prior month and above market forecasts of 0.3 percent.




Thursday July 18 2019
South Africa Trims Repo Rate to 6.5%
SARB | Stefanie Moya | stefanie.moya@tradingeconomics.com

The South African Reserve Bank cut its benchmark repo rate by 25 bps to 6.5 percent on July 18th 2019, as widely expected. It was the first rate cut since March last year. Policymakers noted that inflation expectations continued to moderate and said that they will continue to focus on anchoring it near the mid-point of the inflation target range. The Committee added that future policy decisions are highly data dependent, sensitive to the assessment of the balance of risks to the outlook.

Excerpts from the statement by Governor Lesetja Kganyago:

The inflation forecast generated by the SARB’s Quarterly Projection Model (QPM) is for headline inflation to average 4.4% in 2019 (down from 4.5%). The projections for 2020 and 2021 remain unchanged at 5.1% and 4.6%, respectively. Headline CPI inflation is expected to peak at 5.4% in the first quarter of 2020 and settle at 4.5% in the last two quarters of 2021. The forecast for core inflation is lower at 4.4% in 2019 (down from 4.5%), 4.7% in 2020 (down from 4.8%) and is unchanged at 4.5% in 2021.

Since the May MPC, the rand has appreciated by 3.3% against the US dollar, by 2.4% against the euro, and by 2.3% on a trade-weighted basis. The implied starting point for the rand is R14.30 against the US dollar, compared with R14.40 at the time of the previous meeting. At these levels, the QPM assesses the rand to remain slightly undervalued. While the rand has benefited from improved sentiment towards riskier assets, it underperformed its emerging market peers due to idiosyncratic factors.

Domestic growth prospects and fiscal risks rate high among investor concerns. GDP contracted by 3.2% in the first quarter, reflecting weakness in most sectors of the economy. The sharp quarterly decline was primarily caused by electricity shortages and strikes that fed into broader weakness in investment, household consumption and employment growth. Based on recent short term indicators for the mining and manufacturing sectors, a rebound in GDP is expected in the second quarter of 2019. Continued low business confidence remains a concern for the MPC. The Absa Purchasing Managers’ Index averaged 46.3 points in the second quarter, remaining below the neutral level. The RMB/BER Business Confidence Index remains unchanged at 28 points. The SARB’s composite leading business cycle indicator continued to trend lower.

The SARB now expects GDP growth for 2019 to average 0.6% (down from 1.0% in May). The forecast for 2020 and 2021 is unchanged at 1.8% and 2.0% respectively. The MPC assesses the risks to the growth forecast to be balanced in the near term but remains concerned about longer term risks. Investment prospects will continue to be limited in the absence of structural reforms. The escalation of trade tensions could have further negative impacts. While some cyclical factors constrained recent GDP growth outcomes, the Committee remains of the view that current challenges facing the economy are primarily structural in nature and cannot be resolved by monetary policy alone. Implementation of prudent macroeconomic policies together with structural reforms that raise potential growth and lower the cost structure of the economy remains urgent. 

The overall risks to the inflation outlook are assessed to be largely balanced. Demand side pressures are subdued, wages and rental prices are expected to increase at moderate rates and global inflation should remain low. In the absence of shocks, relative exchange rate stability is expected to continue.

Against this backdrop, the MPC unanimously decided to reduce the repurchase rate by 25 basis points to 6.5% per annum with effect from 19 July 2019. 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 assessment of the balance of risks to the outlook, and will seek to look-through temporary price shocks.




Friday June 28 2019
South Africa Trade Surplus Smaller than Expected
South African Revenue Service | Joana Ferreira | joana.ferreira@tradingeconomics.com

South Africa posted a trade surplus of ZAR 1.74 billion in May 2019, compared to a ZAR 3.43 billion deficit in the previous month and below market expectations of a ZAR 2.7 billion surplus.

Exports jumped 8.1 percent month-over-month to ZAR 112.07 billion in May, boosted by sales of precious metals & stones (29 percent), vegetable products (37 percent), chemical products (24 percent), machinery & electronics (11 percent), and base metals (5 percent). By contrast, exports of vehicles & transport equipments dropped 9 percent. The most important export partners were China (11.0 percent of total sales), the US (7.2 percent), Germany (6.8 percent), the UK (6.1 percent) and Japan (5.4 percent).

Imports rose at a slower 3.0 percent to ZAR 110.33 billion, mainly due to purchases of vehicles & transport equipment (22 percent), machinery & electronics (7 percent), and base metals (10 percent). On the other hand, imports of vegetable products and mineral products declined 25 percent and 4 percent respectively. Main import partners were China (18.5 percent of total purchases), Germany (9.1 percent), the US (7.3 percent), India (4.9 percent) and Nigeria (4.6 percent).

Excluding trade with neighbouring Botswana, Lesotho, Namibia and Swaziland, the country's trade gap was ZAR 7.31 billion. Exports rose 7.3 percent to ZAR 99.24 billion while imports increased 2.6 percent to ZAR 106.55 billion.


Wednesday June 19 2019
South Africa Inflation Rate Edges Up to 4.5% in May
Statistics South Africa | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The annual inflation rate in South Africa rose to 4.5% in May 2019 from 4.4% in the prior month, above market expectations of 4.4%, but still in the mid-point of the Reserve Bank's target range of 3-6%. Main upward pressure came from prices of housing & utilities and food while those of transport slowed.

Year-on-year, prices rose faster for housing & utilities (4.5 percent vs 4.4 percent in April), mostly water & other services (10.9 percent vs 10.8 percent) and food & non-alcoholic beverages (3.2 percent vs 2.9 percent), namely processed (4.8 percent vs 4.2 percent) and unprocessed (1.3 percent vs 0.9 percent). Additional upward pressure came from household contents and services (3.3 percent vs 3.2 percent); recreation & culture (0.4 percent vs 0.3 percent); restaurants & hotels (3.2 percent vs 2.8 percent) and health (5.2 percent vs 4.7 percent).

Meantime, inflation was steady for miscellaneous goods & services (at 5.4 percent); clothing & footwear (at 1.9 percent) and education (at 6.7 percent). 

On the other hand, cost slowed for transport (7.1 percent vs 7.4 percent), of which fuels (11.6 percent vs 12 percent) and alcoholic beverages & tobacco (5.6 percent vs 5.7 percent); while it continued to fall for communication (-0.5 percent vs -0.4 percent).

Annual core inflation rate, which excludes cost of food, non-alcoholic beverages, fuel and energy, stood at an over 1-year low of 4.1 percent in May, unchanged from the previous month and slightly below market consensus of 4.2 percent.

On a monthly basis, consumer prices went up 0.3 percent, following a 0.6 percent gain in the previous month and matching market expectations.


Tuesday June 04 2019
South Africa GDP Annual Growth Stalls in Q1
Statistics South Africa | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The South African economy showed no growth in the first quarter of 2019, after expanding 1.1 percent in the prior period and missing market expectations of a 0.7 percent growth. Slower rises were seen in manufacturing, transport & storage, finance and public administration. In addition, agriculture, mining, construction, utilities and trade posted contractions.

Softer growth was recorded in manufacturing (0.6 percent vs 1.3 percent in Q4); transport & storage (1.1 percent vs 2.4 percent); finance, real estate and business services (2.4 percent vs 3.1 percent) and government services (0.7 percent vs 1.0 percent).

At the same time, contractions were seen in agriculture (-9.4 percent vs -0.6 percent); mining (-4.6 percent vs -3.4 percent); electricity, gas and water (-1.1 percent vs 1.1 percent); construction (-2.9 percent vs -1.1 percent); trade, catering and accommodation (-0.6 percent vs 0.3 percent).

On a seasonally adjusted quarterly basis, the economy shrank 3.2 percent on quarter in the three months to March of 2019, after growing 1.4 percent in the previous period and more than an expected 1.7 percent decline. The contraction was mainly caused by Eskom's blackouts whose adverse effects were spread across sectors.

The central bank recently cut the country's 2019 GDP growth outlook to 1.0 percent from previous 1.3 percent. The government sees the economy expanding 1.5 percent in 2019.




Tuesday June 04 2019
South Africa GDP Contracts the Most in 10 Years
Statistics South Africa | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The South African economy shrank an annualized 3.2 percent on quarter in the three months to March of 2019, following a 1.4 percent growth in the previous period and compared with market expectations of a 1.7 percent contraction. It was the sharpest quarterly decline since Q1 2009, mainly reflecting the effects of Eskom's power cuts on manufacturing and mining.

The electricity, gas and water sector posted the largest decline since Q3 2015 (-6.9 percent from 0.2 percent), mostly due to reduced electricity distribution amid severe blackouts imposed by power utlity Eskom during the period

Manufacturing declined 8.8 percent, after a 4.5 percent expansion in Q4 2018, as seven of the ten manufacturing divisions reported negative growth. The three largest contributions to the decrease were petroleum, chemical products, rubber and plastic products; motor vehicles, parts and accessories and other transport equipment; and wood and wood products, paper, publishing and printing.

Mining shrank 10.8 percent, following a 3.8 percent decline in the previous period, mostly due to ‘other’ mining and quarrying (including diamonds), iron ore and coal.

The agriculture, forestry and fishing sector plummeted 13.2 percent, after a 7.9 percent surge in Q4, mainly because of a drop in the production of field crops and horticultural products.

Other declines were seen in trade, catering and accommodation (-3.6 percent from -0.7 percent) and transport & storage (-4.4 percent from 7.7 percent), as a result of decreases in both passenger and freight land transport.

In addition, growth slowed in finance, real estate and business services (1.1 percent from 2.7 percent) and personal services (1.1 percent vs 1.7 percent). Conversely, government services rose 1.2 percent, recovering from a 0.6 percent drop in the previous period, mainly attributed to an increase in civil service employment related to the general election.

Year-on-year, the economy showed no growth, following a 1.1 percent expansion in the previous period and missing market expectations of a 0.7 percent growth.





Friday May 31 2019
South Africa Trade Balance Swings to Deficit in April
South African Revenue Service | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

South Africa posted a trade gap of ZAR 3.43 billion in April 2019 compared to a downwardly revised ZAR 4.70 billion surplus in the prior month and against market expectations of a ZAR 1.25 billion surplus. Exports fell 1.3 percent while imports soared 6.8 percent.

Exports decreased 1.3 percent month-over-month to ZAR 103.75 billion in April 2019, as sales fell for precious metals & stones (-14 percent); chemical products (-9 percent) and vegetable products (-11 percent). In contrast, shipments rose for vehicles & transport equipments (9 percent) and base metals (7 percent). The most important export partners were China (10.8 percent of total sales), Germany (8 percent), the US (6.9 percent), the UK (5.7 percent) and India (5.6 percent).

Imports climbed 6.8 percent from a month earlier to ZAR 107.18 billion, fuelled by purchases of machinery & electronics (18 percent); plastics & rubber (24 percent) and minereal products (5 percent). On the other hand, imports declined for original equipment components (-12 percent) and vehicles & transport equipments (-10 percent). Main import partners were China (17.8 percent of total purchases), Germany (9.8 percent), the US (6.5 percent), Nigeria (6.2 percent) and India (4.8 percent).

Excluding trade with neighbouring Botswana, Lesotho, Namibia and Swaziland, the country's trade gap widened to ZAR 11.18 billion from an upwardly revised ZAR 2.79 billion in the previous month. Exports dropped 0.7 percent to ZAR 92.63 billion while imports surged 8 percent to ZAR 103.82 billion.


Thursday May 23 2019
South Africa Holds Key Rate Steady at 6.75%
SARB | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The South African Reserve Bank left its benchmark repo rate unchanged at 6.75% on May 23rd 2019, as widely expected. Policymakers said that the stance of monetary policy is broadly accommodative over the forecast period as the medium-term inflation outlook has improved. The bank added that GDP is expected to contract in Q1 2019, based on recent short term indicators and negative growth in mining and manufacturing owing to Eskom blackouts. The GDP growth projections were cut to 1.0% in 2019 from prior 1.3%; the forecast for 2020 and 2021 was unchanged at 1.8% and 2.0%, respectively.

Excerpts from the statement by Governor Lesetja Kganyago:

The inflation forecast generated by the SARB’s Quarterly Projection Model (QPM) has improved since the previous MPC. Headline inflation is expected to average 4.5% in MPC Statement May 23rd, 2019 (down from 4.8%), increasing to 5.1% in 2020 (down from 5.3%) and moderating to 4.6% in 2021 (down from 4.7%). Headline CPI inflation is expected to peak at 5.5% in the first quarter of 2020 and settle at 4.5% in the last two quarters of 2021.

The main drivers of the forecast are a lower starting point for food and services inflation, and the revised oil price assumptions. Food price inflation is now expected to average 3.7% in 2019 (down from 4.1%). The assumptions for Brent crude oil in the QPM were revised up from US$64 to US$69.50 for 2019. The assumptions for 2020 and 2021 were also revised up from US$65 to US$68. 

Since the March MPC, the rand has appreciated by 1.5% against the US dollar, by 2.5% against the euro, and by 3.1% on a trade-weighted basis. The implied starting point for the rand is R14.40 against the US dollar, compared with R14.00 at the time of the previous meeting. At these levels, the QPM assesses the rand to be slightly undervalued.

Based on recent short term indicators and negative growth in mining and manufacturing, GDP is expected to contract in the first quarter of 2019. The disappointing data outcomes partly reflect supply side constraints due to load shedding and a strike at a major gold mine. Fixed capital formation and household consumption expenditure also remain weak. The SARB now expects GDP growth for 2019 to average 1.0% (down from 1.3% in March). The forecast for 2020 and 2021 was unchanged at 1.8% and 2.0%, respectively. The near term growth outlook is limited by the larger than expected slowdown in the first quarter, weak business and consumer confidence as well as growing pressure on household disposable income. 

The MPC assesses the risks to the growth forecast to be on the downside. Weak business confidence, possible electricity supply constraints and high debt levels in certain state-owned enterprises will continue to limit investment prospects. The escalation of trade tensions could significantly impact global trade with likely negative impacts for South Africa as a small open economy. The Committee remains of the view that current challenges facing the economy are primarily structural in nature and cannot be resolved by monetary policy alone. It is now even more urgent to have a combination of prudent macroeconomic policies and structural reforms that raise potential growth and lower the cost structure of the economy. 

The MPC welcomes the continued downward trend in recent inflation outcomes and the moderation in inflation expectations. These are positive developments, as the Committee would like to see inflation remain close to the mid-point of the inflation target range on a more sustained basis. The overall risks to the inflation outlook are assessed to be more or less evenly balanced.

Against this backdrop, the MPC decided to keep the repurchase rate unchanged at 6.75% per year. Three members preferred to keep rates on hold and two members preferred a cut of 25 basis points. The Committee assesses the stance of monetary policy to be broadly accommodative over the forecast period. Any future policy adjustments will continue to be data dependent. The implied path of policy rates generated by the Quarterly Projection Model is for one cut of 25 basis points to the repo rate by the end of first quarter of 2020.