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This week, data showed that South Africa’s unemployment rate rose in 2025Q1, with net job losses compared to 2024Q4. Meanwhile, mining output improved in March but declined overall for the quarter. In the US, inflation eased to a four-year low, while Germany’s economic sentiment rebounded sharply. The UK economy posted impressive growth in Q1; however, persistent downside risks cloud the outlook.
Beyond the data, markets breathed a sigh of relief after the US and China agreed to lower tariffs for an initial 90 days. Elsewhere, the geopolitical landscape remained fraught, with the Russia-Ukraine and Israel-Hamas wars showing no immediate signs of ending and the India-Pakistan ceasefire appearing fragile. In SA, load-shedding returned on the eve of Budget 3.0.
After intensive weekend talks, the US and China agreed to a 90-day rollback of tariffs, offering temporary relief in ongoing trade tensions. The US slashed levies on Chinese goods from 145% to 30%, while China reduced its tariffs on US imports from 125% to 10%. China also agreed to lift export countermeasures issued after April 2, including restrictions on rare earth minerals and magnets used widely in high-tech manufacturing. While this truce is welcome, businesses still face deep uncertainty, given the recent rapid shifts in trade policy. China also criticised the UK-US trade deal, warning that certain stipulations could harm Chinese access to British markets and violate the principle of non-targeted cooperation.
Meanwhile, on his Middle East tour, President Trump also sought to strengthen relations with the Gulf states. After signing a $600bn economic partnership with Saudi Arabian Crown Prince Mohammed bin Salman, Trump pledged to lift all sanctions on Syria (imposed prior to the fall of Syria’s dictator Bashar al-Assad). Then, in Qatar, the White House announced a $96bn deal for up to 210 Boeing aircraft. Notably, Mr Trump did not schedule a trip to Israel.
On the war front, a fragile ceasefire between India and Pakistan holds after a brief but intense conflict. Despite mutual accusations of violations, both nations claim victory. Indian Prime Minister Modi warned against future terrorism and “nuclear blackmail”. Trump later also took credit for averting a nuclear war by threatening to suspend US trade with both countries.
Russia confirmed that President Putin would not attend peace talks with Ukraine in Turkey on Thursday. Instead, envoy Vladimir Medinsky will lead Moscow’s delegation. Trump has, subsequent to Putin’s withdrawal, also decided to skip the talks despite Ukrainian President Volodymyr Zelenskyy’s invitation to both leaders. This adds further delays to potential peace talks.
In Gaza, Israel intensified its military campaign, ordering mass evacuations and launching strikes that reportedly killed at least 50 people. While a glimmer of hope emerged with Hamas’ offer to release a US-Israeli hostage, a lasting ceasefire remains elusive. Israeli Prime Minister Netanyahu has hinted at a brief truce to secure more hostage releases, but insists the war will continue, despite growing public pressure in Israel to end the conflict.
Markets surged this week following news of a trade “ceasefire”, with risk appetite rebounding strongly. On Monday alone, the US S&P 500 jumped over 3%, and the index is on track to end the week more than 4% higher than the previous Friday. The rally extended across global equity markets, although gains elsewhere were more moderate. SA’s JSE ALSI rose 1.6% by Thursday compared to the same time last week.
The shift toward risk-on sentiment was also evident in the retreat of safe-haven assets. Gold prices dropped 4.4% week-on-week (w-o-w), hitting their lowest level since early April on Wednesday. US Treasury bonds also weakened, with the 10-year yield climbing above 4.5%. In contrast, yields on South African government bonds, traditionally considered riskier, fell by 13 basis points.
In currency markets, the US dollar regained some ground against the euro but remained weaker than pre-Liberation Day levels. Reflecting the improved risk sentiment, the SA rand appreciated 0.6% against the dollar, and posted stronger gains of 1.4% and 0.8% against the euro and pound, respectively, closing Thursday at its strongest level against the dollar so far this year.
In commodities, oil prices climbed on the back of trade optimism, renewed sanctions on Iranian crude, and OPEC+’s restraint on production increases in April despite higher quotas. Brent crude rose 2.7% for the week. However, late-week hopes for a US-Iran nuclear deal lowered prices. Prior to that, Brent crude traded above $66 per barrel.
The week begins with a focus on China, where April retail sales data is due on Monday. Attention will also turn to the labour market, following an easing in unemployment in March from a two-year high.
In the eurozone (EZ), final consumer inflation data for April is set for release, with preliminary estimates pointing to a 2.2% y-o-y increase. Also in Europe, on Friday, German consumer confidence figures for May will be published, following a notable surge in business sentiment as covered in the international section. Additionally, S&P Global will release its country-specific flash composite PMIs for May, covering the EZ, US, and UK.
Speaking of the UK, markets will be watching April’s consumer inflation print, alongside retail sales and May’s consumer confidence figures, the latter two are both set for release on Friday.
Domestically, South Africa’s attention will be firmly focused on Wednesday’s National Budget, where the National Treasury will be hoping that the third time’s the charm. Key data releases include April consumer inflation, which is expected to have edged slightly higher, and March retail sales.
Stage 2 load-shedding returned every evening this week. An analysis of the hourly data reveals that unplanned outages have risen, signalling that Eskom has not kept pace with maintenance. As a result, the risk of winter load-shedding has increased. This again highlights the urgency of the ongoing reform agenda – one of the reasons for the lack of generation capacity is that there was little additional capacity added in 2024 and early 2025 due to delays with bid window 5.
Table 1: BER revenue forecast vs Budget 2.0
* BER uses realised revenue as base. NT used a conservative estimate.
* BER assumes no PIT drag relief, whereas NT assumed no PIT drag relief plus 0.5 %pt increase in VAT
According to Stats SA’s Quarterly Labour Force Survey (QLFS), the unemployment rate increased by 1 percentage point (%pt) to 32.9% in the first quarter of 2025, reversing the 1%pt improvement recorded in 2024Q4. The increase in unemployment stems from the entry of recent school leavers into the labour market and expected seasonal job losses following the holiday period. Indeed, employment declined by 291 000, more than offsetting the 133 000 jobs gained in the final quarter of 2024.
Employment fell across five of the ten surveyed sectors, with trade bearing the brunt of the losses (-194 000), followed by construction (-119 000). On the upside, the transport (+67 000) and finance (+60 000) sectors posted the biggest gains in employment.
Additionally, the number classified as not economically active grew by 184 000, pushing the expanded unemployment rate up by 1.2 %pts to 43.1% in Q1 – a concerning sign of the growing number of discouraged work-seekers amid weak labour market conditions. While the first-quarter uptick in unemployment is concerning, it aligns with historical trends and does not appear to be an outlier when compared with past Q1 data.
Mining production outperformed expectations in March, showing a notable improvement and declining by “just” 2.8% y-o-y following a 9.8% contraction in February. The biggest drag on annual performance came from PGMs (declining by 9.9% and shaving 3 %pts off overall GDP) and gold (-11%; -1.5 %pts). Conversely, the largest positive contributor was iron ore (7.5%; 1.1 %pts). On a seasonally adjusted basis, output increased by 3.5% m-o-m, rebounding from a 4.1% decline in February. However, the steep February contraction was enough to drag first-quarter mining production down 4.5% q-o-q (sa), confirming that the sector detracted from GDP in Q1.
US consumer inflation moderated to a below-consensus 2.3% y-o-y in April, from 2.4% in March. This was the lowest inflation print since February 2021. However, on a monthly basis, inflation ticked up slightly; April’s reading edged up 0.2%, a touch softer than expected but higher than March (-0.1%). Over half of the monthly gain was driven by a rise in the shelter index. Energy prices also picked up noticeably in April after declining in March, as increases in electricity and gas prices more than offset a decline in gasoline prices. Core inflation, which excludes food and energy, was unchanged at 2.8% y-o-y in April, as expected. Meanwhile, PPI inflation for final demand also surprised to the downside in April, slowing to 2.4% y-o-y from 3.4% y-o-y in the prior month.
Economic morale improved in Europe’s largest economy, with the ZEW Indicator of Economic Sentiment for Germany registering a significant recovery in May. The index surged by 39.2 points to 25.2, well above the consensus forecast of 11.9. This surge marks a sharp reversal following April’s steep plunge to -14, with optimism being ascribed to the formation of the new federal government, the suspension of the most severe US tariffs, and recent interest rate cuts from the European Central Bank (ECB). However, the assessment indicator of the current economic situation in Germany is yet to turn around and remains stable as the lowest in the EZ.
A preliminary estimate showed that the UK economy outperformed expectations in the first quarter, posting its strongest quarterly growth in a year. Real GDP grew by 0.7% q-o-q in 2025Q1, up sharply from a 0.1% q-o-q rise in 2024Q4. The expansion was driven by broad-based growth in the services sector, a recovery in the production sector (which includes manufacturing, mining and energy) after three consecutive quarters of decline, and a surge in business investment.
Looking ahead, global growth is expected to slow due to higher tariffs, and the recently announced UK-US trade deal offers the UK only limited relief from these pressures. The Bank of England (BoE) has cautioned against reading too much into the growth just in the first quarter and forecasts output to expand by 1% this year.
Editor: Tracey-Lee Solomon
Tel: +27 (0)21 808 9755
Email: tsolomon@sun.ac.za
Click here for previous editions of this publication.
Please refer to the glossary on the BER website for explanations of technical terms.
Friday, 16 May 2025
