More poor Q1 data, with NHI signing grabbing the local headlines


Lisette IJssel de Schepper

This week was another poor showing on the local industrial data front, with internal trade data mixed. While we still see very subdued quarterly growth, there is an increased possibility that the economy may have stagnated or tipped into a contraction in 2024Q1 relative to 2023Q4. The margin is likely to be tight. Also, there is still a lot of uncertainty around the ‘hidden’ services sectors, and, with possible revisions to 2023Q4 (particularly to agriculture), it is difficult to make a firm call. The international data focus was on the US consumer inflation data released on Wednesday. Bloomberg somewhat dramatically dubbed it this year’s most important data release for markets. Indeed, when after three months of upward surprises, the data came in more in line with expectations, markets rallied, and the US S&P 500 rose to an all-time high on Wednesday.

Beyond the local data, policy was also in focus domestically as President Cyril Ramaphosa signed the National Health Insurance (NHI) Bill into law on Wednesday. The NHI Bill and its implications have been unpacked in detail by numerous experts over recent months (years), and there is little we can add to the debate. As we have said before, we are not questioning the worthy goal of universal healthcare coverage, but the NHI is not implementable in its current form given funding, infrastructure, capacity and administrative constraints. The timing  - being signed just two weeks before the election – and the public fanfare around the signing event is telling. Indeed, many political analysts have argued that the presidency is aware that the Bill will be tied up in courts for years and that there is unlikely to be any economic fallout from signing it into law now – although there are risks it could hurt the relationship with the business community.

In the US, electioneering ahead of November’s presidential election is also ramping up. President Joe Biden instated a range of tariffs on Chinese-made electric vehicles, solar panels, steel and other goods. Donald Trump, of course, argues that the measures do not go far enough and while campaigning, has floated the idea of a 60% tariff on all Chinese imports. China could retaliate by instituting its own tariffs on US imports. In any case, tension between the US and China (and Europe and China) is intensifying with more trade protectionism measures likely. The main focus in the US was, however, on the consumer inflation data. Following the resumption of a downward trend in price pressure, markets, for the first time since April, now price in two 25bps cuts by the US Fed. Sticky inflation and higher for longer interest rates are hurting Biden’s re-election chances.

Nonetheless, following the CPI data, US stock markets rallied, while bond yields made a U-turn and moved lower. The dollar was sold off and depreciated by about 1% against the euro. The rand strengthened against the weaker dollar, but also booked some gains against the euro and pound. Higher industrial commodity prices in recent months may have also provided some support to the rand. Meanwhile, the local JSE Alsi gained 2.5% w-o-w, which was better than seen in most international stock markets. Several stock indices in the US reached record highs on Wednesday. US markets were also affected by the continued meme stock frenzy. Stock prices of shares like Gamestop and distressed movie theatre chain AMC were riding a rollercoaster of gains and losses.  In commodity markets, the gold price rose following the CPI release. The platinum price had a stellar week and rose by almost 9%. It closed above $1 000/oz for some days this week for the first time since 1 January. Meanwhile, early in the week, the International Energy Agency (IEA) announced that it expects global oil demand to soften, which weighed on the Brent crude price.

Finally, back to domestic dynamics. The streak of no load-shedding has now continued for more than 50 days. The lack of load-shedding is largely due to a significant decline in unplanned capacity losses relative to 2023. Lower demand for electricity from households and businesses that now have alternative (mainly solar) power sources in place must also help. Meanwhile, planned outages (maintenance) are trending down in line with long-term seasonal patterns. As such, the energy availability factor (EAF) crept up to above 65% according to the latest official Eskom data (which is slightly lagged). Minister Kgosientsho Ramokgopa posted on social media that the EAF reached a respectable 70.8% on Monday. The system for sure remains fragile, and it is too early to claim victory (cynics argue load-shedding will be back with a vengeance after the election), but the absence of electricity disruptions in April and May so far should provide some bounce to GDP in Q2. The question is, of course, by how much. In addition to the positive impact on production, it will be interesting to see how the absence of load-shedding (and anticipation of the national election in less than two weeks) will impact business confidence in Q2. The RMB/BER Business Confidence Index will come out on 5 June.


A sovereign credit ratings review for SA by S&P Global Ratings is scheduled for later today. We do not expect a change to its current ratings and stable outlook. There have been no unexpected, major changes to the fiscal or growth outlook relative to November’s review that would warrant an adjustment.

It will be a quiet week on the domestic data calendar with the April consumer inflation data on Wednesday the most notable release. We see headline inflation remaining steady at 5.3% y-o-y, implying a slight 0.3% m-o-m uptick. Core inflation should decelerate from 4.9% in March. From April, both headline and core could trend up somewhat in the coming months, although the recent stronger rand and lower oil price are favourable for inflation dynamics.

On the international front, on Wednesday, attention will be on the UK inflation data and minutes from the last Federal Reserve interest rate decision. The usual batch of preliminary PMI data for the Eurozone, UK, and US will follow on Thursday.


Nkosiphindile Shange


According to Stats SA, mining production shrank by 5.8% y-o-y in March, following an upwardly revised expansion of 10.3% in February (previously, 9.9%). This is the steepest contraction since February 2023, and well below expectations. The biggest drags on production were coal (-9.1% y-o-y; -2.3%pts), manganese ore (-12.2%; -1%pts), iron ore (-6.8%, -0.9%pts), and PGMs ( -3.6%; -0.9%pts).  On a seasonally adjusted (sa) basis, production contracted by 5% m-o-m in March, following growth of 5.3% in February, and a contraction of 1% in January. This is sad news for GDP 2024Q1, as the mining sector contracted by  1.7% q-o-q (sa) compared to an expansion of 2.4% recorded in 2023Q4.


Internal trade data from Stats SA indicated that real retail trade sales increased by 2.3% y-o-y in March, beating the economists' expectation for 0.4% growth. The largest contribution came from general dealer sales (+6.4% y-o-y; + 2.8%pts). On a monthly basis, sales rose by 1.4% following a 1% gain in February. This was, however, not enough to offset a sharp 3.3% contraction in January and sales were down by 0.9% q-o-q in Q1. Moving to wholesale trade, sales declined by 12.5% y-o-y in March, contracting for a seventh straight month. Postively, a steep 4% m-o-m decline was not enough to cancel out monthly growth recorded in January and February and sales were up 0.4% q-o-q. Motor trade sales decreased by 10.4% y-o-y in March on the back of a 7% m-o-m drop (sa). The largest negative contributors were new vehicle sales (-23.7% y-o-y; -6.2%pts), sales of accessories (-9.9%; -2%pts), and used vehicle sales (-9.3%; -1.9%pts). On a quarterly basis, sales declined by 2.9% following 0.9% growth in Q4.


According to the Stats SA QLFS, the official unemployment rate increased to 32.9% in 2024Q1, a 0.8%pts increase from 32.1% in 2023Q4. Even though 22 000 jobs were created between 2023Q4 and 2024Q1, this was not enough to absorb the 215 000 new job seekers who entered the markets, mostly students and homemakers, in 2024. The unemployment rate, according to the expanded definition, also increased to 41.9% in 2024Q1, indicating that more and more job seekers are becoming discouraged due to low job prospects


Pabalelo Mosoma


Headline CPI inflation for the US moderated slightly to 3.4% y-o-y in April from 3.5% in March, aligning with market expectations. This was driven by a decline in the prices of used vehicles (-6.1% y-o-y) and new vehicles (-0.4% y-o-y), while food prices remained unchanged and shelter prices slowed (up 5.5% y-o-y in April vs 5.7% y-o-y in March). On a monthly basis, headline inflation rose by 0.3% in April, down from the 0.4% acceleration recorded in March. More than 70% of the increase in the monthly headline inflation was due to a rise in gasoline and shelter prices. Meanwhile, as expected, core inflation, which excludes food and energy costs, eased to 3.6% y-o-y in April from 3.8% the previous month.

In contrast to consumer prices, factory-gate prices (as measured by the Producer Price Index (PPI)) came in hotter than expected as the cost of services rose sharply. PPI inflation accelerated to 0.5% m-o-m in April following a downwardly revised 0.1% decline in March, above market expectations of a 0.3% increase. However, despite PPI inflation rising more than expected, Fed Chair Jerome Powell on Tuesday described it as a mixed rather than hot report, given that the previous month's figure was downwardly revised. Regarding consumer inflation, Powell said that he expects inflation to continue moderating but noted that he is not as confident of this as he was at the start of the year.

Still, in the US, monthly nominal retail sales were flat in April, compared to the downwardly revised 0.6% expansion recorded in March. This was well below market expectations for a 0.4% rise. Sales at gasoline stations and clothing stores contributed positively to the overall figure, while the most significant drop was seen in sales of motor vehicles and non-store retailers.

In all, the latest data (including the somewhat cooler jobs data of late) suggests that the US economy is at least not reaccelerating, which should be of comfort to the Fed.


Germany's ZEW economic sentiment index climbed to 47.1 points in May from 42.9 in the previous month. This was better than the market anticipated. Tentative signs of sustained economic recovery following stronger-than-expected GDP growth recorded in 2024Q1 as well as hopes for a June interest rate cut by the ECB are behind the upswing in confidence among financial experts.


Japan’s GDP contracted in the first quarter of 2024 at an annualised pace of 2.0%, more than the expected 1.5% decline. Weak private consumption drove this decline, indicating that high inflation (due to a weak yen) is hurting domestic demand. The dismal GDP data poses challenges to central bank policymakers as they seek to raise interest rates again, moving away from near-zero levels after hiking for the first time since 2007.


Editor:         Lisette IJssel de Schepper
Tel:              +27 (21) 808 9777

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Name: More poor Q1 data, with NHI signing grabbing the local headlines