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.

Domestically, Stats SA released some key sectoral data for the third quarter last week. The numbers suggest that the trade sector should contribute positively to quarterly GDP growth, while the mining sector will subtract. Internationally, it seems that read more

Domestically, Stats SA released some key sectoral data for the third quarter last week. The numbers suggest that the trade sector should contribute positively to quarterly GDP growth, while the mining sector will subtract. Internationally, it seems that China’s economy continues to lose momentum as industrial output, fixed investment and retail sales growth slowed. Meanwhile, the latest GDP numbers from Germany and Japan indicate that growth stalled in the third quarter. Lastly, financial markets were mostly influenced by the extended US-China trade dispute; this time the pendulum swung slightly in favour of emerging market currencies. This week is fairly busy on the domestic data calendar with the release of the October consumer inflation data on Wednesday, the SA Reserve Bank’s (SARB) latest policy interest rate decision on Thursday, and S&P Global’s credit rating announcement late on Friday. Headline consumer inflation is expected to moderate further to 3.9% y-o-y in October, while the SARB is projected to keep the repo rate on hold at 6.5%. S&P is likely to revise the outlook on SA’s credit rating (which is already sub-investment grade) from stable to negative.

Notwithstanding the apparent optimism surrounding President Cyril Ramaphosa’s second Investment Conference last week, economic data released for Q3 disappointed. The consumer turned notably more pessimistic during the quarter, while the latest activity data read more

Notwithstanding the apparent optimism surrounding President Cyril Ramaphosa’s second Investment Conference last week, economic data released for Q3 disappointed. The consumer turned notably more pessimistic during the quarter, while the latest activity data from the country’s secondary sector also paints a dismal picture for GDP. On the global front, the focus was on the latest trade data from the US, China and Germany. The data came against a backdrop of increased optimism about the possibility of a preliminary trade deal being reached between the world’s two largest economies.

The Medium Term Budget Policy Statement (MTBPS) dominated domestic headlines for most of last week. The overall message was that the fiscus (and the economy) is under more pressure than when the budget was tabled in February. In the absence of substantial read more

The Medium Term Budget Policy Statement (MTBPS) dominated domestic headlines for most of last week. The overall message was that the fiscus (and the economy) is under more pressure than when the budget was tabled in February. In the absence of substantial corrective measures (mainly on government expenditure), key fiscal metrics are projected to worsen notably over the next few years. The weaker fiscal position was an important contributor to Moody’s decision after the close of financial markets on Friday to lower its outlook for SA’s credit rating to negative from stable.

On the domestic front, the only notable data release was consumer inflation for September. While the benign inflation print and weak domestic GDP growth support another interest rate cut, the South African Reserve Bank (SARB) could be hesitant to cut rates – read more

On the domestic front, the only notable data release was consumer inflation for September. While the benign inflation print and weak domestic GDP growth support another interest rate cut, the South African Reserve Bank (SARB) could be hesitant to cut rates – see the domestic section. In the international section, the interest rate decision by the European Central Bank (ECB) is discussed as well as the latest Purchasing Managers’ Index (PMI) prints from the Eurozone and US. In contrast with last week’s light calendar, this week will be busy on both the domestic and international front. Domestically, the focus will be on the Medium Term Budget Policy Statement (MTBPS) to be presented by Finance Minister Tito Mboweni on Wednesday. Internationally, final PMI figures for September, Q3 GDP estimates from Europe and the US, as well as the policy interest rate decision by the US Federal Reserve will be in focus.