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This week brought a flurry of data releases alongside a heavy dose of political drama, both locally and globally. Domestically, tensions persisted in the DA-ANC relationship. On the international stage, headlines were dominated by the passage of the ‘Big Beautiful Bill’ and the fast-approaching tariff deadline. The domestic data was mixed, with an encouraging uptick in the June Absa PMI, although not enough to push the manufacturing sector into expansionary terrain, countered by a decline in the S&P Global print. Yesterday’s stronger-than-expected US jobs report was the standout global data release. With contradicting messages about the health of the job market in lower-tiered releases earlier in the week, the June nonfarm payrolls came out stronger than expected. The solid print means that an interest rate cut by the US Federal Reserve (Fed) later this month is now highly unlikely, despite President Donald Trump’s push for faster easing.
At home, the DA-ANC relationship remained tense after the DA announced it would withdraw from the National Dialogue following the firing of its deputy minister, Andrew Whitfield. It also said it would not support the budgets of ministries associated with fraud. Although the DA argues they want to remain in the GNU for now, even if just to avoid a “coalition of chaos”, they admitted that they have mulled over a potential vote of no confidence in the President. While the EFF and MKP would possibly be supportive of such a move, the three parties alone do not have seats to get this through (or block budget votes). Even if ‘nothing’ happens in the end, all the theatre and public discontent are not supportive of local and foreign sentiment towards SA.
On the global political stage, the feud between Trump and Elon Musk continued. The president said that Musk benefitted too much from electric vehicle subsidies. Musk, in turn, said he would start the ‘America Party’ if Trump’s One Big Beautiful Bill Act (OBBBA) passed. Lawmakers worked hard to get it through before Trump’s imposed deadline of Independence Day (today). Many last-minute adjustments were necessary to get it approved by the Senate with a tie-breaking vote by JD Vance. After more negotiating, the House of Representatives passed the bill (with more amendments) yesterday, with two Republicans voting against it. Some warn that cutting health benefits and food support will hurt the Republicans in next year's mid-term, although much of the cost-cutting only comes through in 2027. The core of the $3.4 trillion bill is an extension of the 2017 Trump tax cuts, while providing new resources for the crackdown on (illegal) immigration and military spending.
Meanwhile, the end of the 90-day pause on the implementation of reciprocal trade tariffs by the US, on July 9, is creeping closer. Trump said he will send letters to countries with their specific tariff rate, and that some trade deals with countries will be concluded before then. The European Union said it would accept 10%, with some vital exclusions – although there is no indication that this is what the US has in mind for the region. Canada dropped a digital services tax to appease the US, while Japan took a harder stance (and is likely to receive ‘punishment’ for it). The only trade (or rather tariff) deals agreed on so far are with the UK, Vietnam (says the US) and China, which is more of a ceasefire. It is difficult to try to predict what Trump will do next week, or going forward. Some speculate that he might extend the current 10% universal tariff on all countries with which the US does not have a trade agreement by the deadline. SA is hoping for another extension as a US-SA trade deal is still being negotiated, with it now likely that it needs to conform to a framework/template for all sub-Saharan African countries.
There was more political drama in the UK, where Prime Minister Keir Starmer initially failed to publicly back Chancellor Rachel Reeves following a U-turn on the government’s welfare reforms that derailed her fiscal plans. The reforms would have resulted in significant spending savings; this was the second time savings measures were abandoned this year. Yields on 10-year gilts spiked, and the pound weakened, with markets concerned that a possible replacement for Reeves would be less fiscally constrained. The rout extended to global bond markets.
Meanwhile, SA’s 10-year bond yield moved lower this week, and the rand strengthened against the major international currencies. In commodity markets, the gold price was largely flat w-o-w while the platinum price lost a little ground – although remaining about $300/oz above the price seen this time last month. The Brent crude price rose a bit, after prices came down sharply following the end of the Israel-Iran war in June. OPEC+ members are scheduled to meet this weekend with rumours that another output increase is on the cards.
The manufacturing production data for May is due on Thursday. While production declined sharply on an annual basis, output perked up on a month-on-month comparison in April. Should we see another improvement, this bodes well for the factory sector’s contribution to GDP in Q2. However, the decline in the Absa PMI in May suggests this is unlikely.
On the international front, Chinese CPI data on Wednesday is expected to confirm that the economy remained in deflationary terrain for another month in June. The CPI index has declined for four consecutive months, with PPI (due on the same day) experiencing an even deeper and more protracted slump. The June US Fed interest rate meeting minutes will be released on Wednesday. With markets frequently readjusting expectations around the timing of the next Fed rate cut, the words and any change in tone will be scrutinised, as always. That said, the strong June jobs data shut the door on the possibility of a July rate cut. Odds for a September cut, which was fully priced ahead of the jobs data, also declined.
Markets will be sensitive to any news around the pending tariff deadline and the way forward.
Breakdowns at Eskom power plants reached 15 137 MW last week Friday—above the 15 000 MW threshold for potential stage 2 load-shedding. Despite this, and icy weather conditions, Eskom said it had enough available capacity (30 703 MW plus 720 MW from Kusile Unit 6) to meet the evening peak demand of 28 810 MW. Kusile Unit 6, though not in full commercial operation, has contributed to the grid since March. Eskom maintains that if outages stay below 13 000 MW, load-shedding can be avoided, but if they hover around 15 000 MW, up to 21 days of stage 2 load-shedding may occur over winter.
For now, Eskom says the power system remains stable, with emergency reserves in place and plans to return more near-term generation to service. Scheduled maintenance has been scaled down to boost supply, and the Energy Availability Factor (EAF) is currently 60.61%. However, unplanned losses (UCLF) rose, partly due to delays in bringing units like Medupi 4 back online.
Diesel-powered open-cycle gas turbines (OCGTs), used as emergency backup, have seen higher usage than last year. Although the weekly load factor dropped to 7.25%, year-to-date usage (11.37%) and fuel spend (R4.76 billion) remain elevated. Eskom expects diesel usage to decline as more units return from long-term repairs.
Meanwhile, Eskom is facing a major internal corruption scandal, with several of its (former) employees implicated in a large-scale electricity fraud scheme that has cost the utility billions of rands. The scheme involved the creation and sale of fraudulent prepaid electricity tokens, using both outdated offline Credit Dispensing Units (CDUs) and the newer Online Vending System (OVS), which was ironically introduced in 2008 to curb this very issue. Insiders at Eskom helped criminal syndicates access the necessary equipment and system credentials to generate fake tokens, which were then sold on the black market at extremely low prices, sometimes as little as 25 cents per unit.
The SA Association of Freight Forwarders (Saaff) reported that the Cargo Movement Update (CMU), compiled with Business Unity SA, showed rising throughput in the last two weeks of June. Local ports handled over 97 000 TEUs and 87 000 TEUs on June 22 and 29, respectively. Meanwhile, the government issued a directive to declare certain port jobs as essential services. This is important to maintain the functioning of the ports during possible labour strikes.
The mining cadastral reforms, which are crucial for restoring confidence in the mining system, have again been delayed. The system will now only go live in October.
PARTICIPATE IN THE BER BUSINESS TENDENCY SURVEYS
Nadia Matulich
The Absa PMI rose by 5.4 points in June to reach 48.5. Although this remains in contractionary territory, it is the second-highest reading this year and the largest monthly increase since September 2024. The improvement was driven in part by a rebound in new sales orders, with domestic demand contributing more to the recovery than exports. However, the business activity index edged down slightly. Encouragingly, expected business conditions held steady at 62.5 points in June, following May’s sharp 13.9-point jump from April.
In contrast, the S&P Global PMI declined by 0.7 points to 50.1 in June. While it remains in expansionary terrain, the underlying data showed output and new business declines. Furthermore, the forward-looking confidence index slipped to its lowest level in four years. The divergence between this index and the Absa PMI could reflect survey timing: the Absa survey was conducted after the cessation of the 12-day war (13–24 June) and amid a lull in global tariff news, while the S&P survey was fielded during the final two weeks of the month and likely captured more of the lingering uncertainty.
Naamsa reported that new vehicle sales rose by 18.7% y-o-y, slightly down from 22% in May. Despite a m-o-m decline, sales were still up for a fourth consecutive quarter. Exports bounced back with 7.9% y-o-y growth from a 14.6% contraction in May.
According to the BER’s inflation expectations survey, expectations declined across the board in Q2. Inflation expectations of all three social groups, (businesspeople, trade union representatives and analysts) declined, with the downward adjustment extending across the forecast horizon. On average, the respondents expect that headline consumer inflation will be 3.9% during 2025, then rise gradually to 4.3% in 2026 and 4.5% in 2027. The inflation expectations of households for the next 12 months decreased to 5.4%, from 5.7% before. This is the lowest rate since the fourth quarter of 2021.
The moderation in expectations not only firms up the likelihood of a 25bps rate cut in July but should also support the SA Reserve Bank’s (SARB) desire to shift to a lower inflation target. Click here for Claire Bisseker’s take on the potential target change.
Nadia Matulich
Starting with the US labour market, nonfarm payrolls increased by 147 000 jobs in June, with upward revisions to the last two months. The unemployment rate edged down to 4.1% (from 4.2% in May), beating market expectations for an uptick to 4.3%. These outcomes are broadly in line with the averages of the past year: 146k monthly job gains and unemployment fluctuating between 4.0% and 4.2%. Gains were concentrated in state government and healthcare, while federal government employment declined.
Turning to the ISM PMIs, the Manufacturing PMI rose by 0.5 points to 49.0%, remaining in contractionary territory for the fourth consecutive month. The rate of contraction slowed, driven by increases in production and inventory indices. Inflationary pressures ticked up. Most survey respondents cited trade and geopolitical tensions as shaping the outlook.
The ISM Services PMI climbed from 49.9 in May to 50.8 in June, moving back into expansionary territory. Business activity, new orders, inventories, and new export orders all improved. Whilst the prices paid index moderated, commentary continued to reference price pressures, with several noting the influence of AI-related investment and elevated interest rates. Tariffs, Middle East tensions, and general uncertainty were also widely mentioned.
The University of Michigan Consumer Sentiment Index, released late last week, recorded its first improvement in six months, rising from 52.2 in May to 60.7 in June. The current conditions index increased to 64.8 (from 58.9 in May), though it remains 18 points below the December 2024 level. Expectations improved from 47.9 to 58.1. Consumers still fear slower economic growth and rising inflation, but do not currently associate recent Middle East developments with domestic economic risk.
The NBS and Caixin PMIs for June both showed slight improvements. The NBS Manufacturing PMI rose by 0.2 points to 49.7, the second consecutive increase, though it remains in contractionary territory. The improvement was led by gains in production, new orders, raw material availability, and supplier delivery times. However, employment weakened. The NBS Services PMI also ticked up by 0.2 points, to 50.5. Gains were seen in business activity, new orders, input prices, and output prices. On the downside, employment and expectations for business conditions declined. As a result, the NBS Composite PMI rose from 50.4 to 50.7.
The Caixin General Manufacturing PMI returned to expansionary territory at 50.4, up from 48.3 in May. This marks the eighth improvement in nine months. The rise was driven by stronger domestic demand (helped by promotional activity), whilst export orders fell for a third consecutive month. Employment and order backlogs deteriorated. Input and output prices declined again, continuing the deflationary trend observed across China in recent months. Business sentiment also weakened and remains below the long-run average.
In the Eurozone, preliminary estimates showed annual headline consumer inflation up from 1.9% to 2.0% in June, with a 0.3% m-o-m increase. Unemployment also ticked up marginally from 6.2% to 6.3%. The final HCOB Eurozone Composite PMI was revised up to 50.6 (from a preliminary estimate of 50.2, discussed last week), indicating marginal growth.
Editor: Lisette IJssel de Schepper
Tel: +27 (0)21 808 9755
Email: lisette@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, 04 Jul 2025
