Last Thursday, President Ramaphosa delivered his State of the Nation address (Sona) to parliament. The statement gave recognition to the economic challenges SA currently face, especially regarding electricity supply. More emphasis was placed on the role of read more

Last Thursday, President Ramaphosa delivered his State of the Nation address (Sona) to parliament. The statement gave recognition to the economic challenges SA currently face, especially regarding electricity supply. More emphasis was placed on the role of the private sector to help solve these challenges. Read more in the Current affairs section. On the domestic data front, Stats SA released a set of key economic indicators for December 2019, thereby completing the picture of Q4 and the full year. Overall, these numbers point towards a high probability for another quarterly GDP contraction during Q4. Internationally, GDP growth also stalled in the UK and Germany during the fourth quarter of 2019. The weak performance was driven by ongoing Brexit uncertainty and a slowdown in international trade. Besides these, consumer data from the US points to strong spending that is pushing up prices. Meanwhile, financial markets started to move past the coronavirus scare as stock prices in Europe reached new highs and commodity prices increased.

After a very poor performance in 2019, it is increasingly apparent that SA GDP could contract again in 2020Q1. The impact of the coronavirus in China may push global GDP growth (measured quarter-on-quarter) to the weakest pace since the global financial read more

After a very poor performance in 2019, it is increasingly apparent that SA GDP could contract again in 2020Q1. The impact of the coronavirus in China may push global GDP growth (measured quarter-on-quarter) to the weakest pace since the global financial crisis. This will have adverse spillovers to SA exports. Domestically, a week of continuous load shedding with more to come suggests that mining, manufacturing and electricity output will be under a lot of pressure in the first quarter. Concerns about the growth impact of the coronavirus continued to weigh heavily on certain industrial commodities and oil last week. Chinese stock markets also remained depressed. Global share markets, however, managed to increase last week amid news that China is rolling back some US import tariffs and a market-friendly address by US President Donald Trump.

Global and domestic GDP growth concerns intensified last week as the coronavirus continued to spread and load shedding returned in SA. On Thursday, the World Health Organisation declared the virus outbreak a global crisis. However, Chinese officials expressed read more

Global and domestic GDP growth concerns intensified last week as the coronavirus continued to spread and load shedding returned in SA. On Thursday, the World Health Organisation declared the virus outbreak a global crisis. However, Chinese officials expressed confidence that the rate of new infections could peak within the next week or so. Uncertainty about the duration of the outbreak weighed heavily on global financial markets with stock markets and emerging market currencies (including the rand) suffering big losses

The sentiment on global financial markets was dampened last week by the outbreak of a respiratory virus in China. In order to prevent its spread, travel bans were put in place across China during a time of the year (Lunar New Year celebrations) when travel read more

The sentiment on global financial markets was dampened last week by the outbreak of a respiratory virus in China. In order to prevent its spread, travel bans were put in place across China during a time of the year (Lunar New Year celebrations) when travel normally peaks. Depending on the length of the travel restrictions, it is set to dampen economic activity in China, raising concerns about the demand for commodities, luxury goods, etc.

With activity levels starting to pick up after the holidays, there was some relief that load shedding was absent last week. Besides the SA Reserve Bank’s (SARB) unexpected 25bps interest rate reduction (discussed in the domestic section), local newsflow read more

With activity levels starting to pick up after the holidays, there was some relief that load shedding was absent last week. Besides the SA Reserve Bank’s (SARB) unexpected 25bps interest rate reduction (discussed in the domestic section), local newsflow focused on potential further private sector job losses, with a number of companies reporting that retrenchments may be inevitable in the current poor growth environment. Internationally, China and the US signed the first phase of the newly negotiated trade deal. This could be important for China, which saw its economic growth rate slow down to a 29 -year low in 2019. Meanwhile, with the exception of the manufacturing sector, the US economy seems to be weathering the trade storm. Among other factors, this was reflected in recent strong retail sales numbers. In financial markets, resource companies on the JSE did well last week as the price of platinum group metals (PGMs) continued to surge and the rand exchange rate weakened.

If the first two weeks of 2020 are anything to go by, it is likely to be another extremely challenging year for the SA economy. Hope of an acceleration in real GDP growth towards 1% is already fading, with forecasts being revised down. The BER macro forecast read more

If the first two weeks of 2020 are anything to go by, it is likely to be another extremely challenging year for the SA economy. Hope of an acceleration in real GDP growth towards 1% is already fading, with forecasts being revised down. The BER macro forecast will be updated this week against the backdrop of renewed electricity load shedding at the start of the year, the resignation of Eskom chairman Jabu Mabuza as the power utility becomes entangled in ANC factional battles, and renewed global geopolitical uncertainty.

Domestic news headlines continued to be dominated by Eskom load shedding, especially the unprecedented move to stage 6 power rationing on Monday night. This forced some of SA’s largest mining companies to (temporarily) suspend underground operations on Monday read more

Domestic news headlines continued to be dominated by Eskom load shedding, especially the unprecedented move to stage 6 power rationing on Monday night. This forced some of SA’s largest mining companies to (temporarily) suspend underground operations on Monday night and the day shift on Tuesday. Amongst other things, the crisis once again put a stark focus on government regulatory delays in granting licences to private companies for own power generation. Furthermore, it is critical that the next round of independent power producer (IPP) contracts be signed soon. On the data front, numbers released this week suggest that the primary and secondary sectors started the fourth quarter on a better footing, though consumers are now feeling more pain. Their lack of spending power is also culminating in lower price increases. Internationally, the central banks of the US and Eurozone kept their policy interest rates unchanged, as markets had expected. Meanwhile, business sentiment (including expectations) surprised positively in Germany despite recent contractions in production. In election news, it became clear this morning that the Conservative Party secured a majority after the UK’s general election yesterday. This should provide Boris Johnson the mandate he sought to proceed with Brexit. Financial markets were relatively steady this week on the back of uneventful monetary policy announcements, while the British pound gained some ground following the preliminary UK election results. A general risk-on mood prevailed on global markets, which supported the rand exchange rate.

The woes at state owned enterprises continued to dominate domestic news headlines last week. Not only was SAA put in business rescue, but Eskom load shedding returned late in the week, highlighting the operational difficulties that the power utility continues read more

The woes at state owned enterprises continued to dominate domestic news headlines last week. Not only was SAA put in business rescue, but Eskom load shedding returned late in the week, highlighting the operational difficulties that the power utility continues to face. The mood was not lifted by the latest GDP data, which revealed that the economy contracted on a quarterly basis in 2019Q3. While we had warned of the possibility of a GDP decline, the extent of the weakness was more severe than anticipated. Unfortunately, early data releases for Q4 do not bode well for a strong recovery. Indeed, a continuation of last week’s load shedding could further dent growth in Q4. The international section looks at the latest round of Purchasing Managers’ Index (PMI) figures from across the globe. Most PMIs surprised slightly on the upside with some continued improvement in manufacturing PMIs. However, the drag provided by sluggish international trade suggests that any recovery will be slow.

The domestic newsflow continued to be dominated by the dire financial situation at South African Airways (SAA). After the damaging weeklong strike, the Department of Public Enterprises is now saying that a ‘radical’ restructuring is required. Regarding read more

The domestic newsflow continued to be dominated by the dire financial situation at South African Airways (SAA). After the damaging weeklong strike, the Department of Public Enterprises is now saying that a ‘radical’ restructuring is required. Regarding domestic data releases, the latest RMB/BER Business Confidence Index (BCI) revealed that sentiment edged higher in the final quarter of 2019. However, the increase was marginal as underlying demand remained weak. Friday saw the release of another set of poor monthly fiscal data. This is unpacked, along with the latest data on producer prices and the international trade balance. On the international front, the latest Purchasing Managers Index (PMI) data from China came out better than expected over the weekend. For more, as well and the latest US data. SAA is likely to remain a key focus this week. The key domestic data event will be the release of the 2019Q3 GDP numbers. We expect GDP to be flat compared to the second quarter, which is in line with the market consensus. The risk is that GDP contracted in the third quarter.

Last week, the domestic news cycle was dominated by developments around South African Airways (SAA), the interest rate decision of the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC), and S&P Global’s ratings update. On the SAA front, the read more

Last week, the domestic news cycle was dominated by developments around South African Airways (SAA), the interest rate decision of the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC), and S&P Global’s ratings update. On the SAA front, the company and unions agreed on a salary increase amounting to 5.9%, contingent on funds being available. The planned retrenchment of non-management workers has also been put on hold until early 2020. On the data front, the low inflation print for October fuelled speculation of an interest rate cut. However, the MPC elected to keep the policy rate unchanged. More on this in the Domestic section. Finally, S&P Global downgraded the outlook on SA sovereign debt from stable to negative. On the international front, we discuss the latest flash Purchasing Managers’ Indices (PMI) from across the globe. While the PMI prints improved in the US, activity remains under pressure in Europe and the UK.