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Another big week on the local political front, but with some constructive momentum. SA President Cyril Ramaphosa dismissed Higher Education and Training Minister Nobuhle Nkabane. While no official reasons were provided, Nkabane is facing accusations, which she denies, that she misled parliament. After Nkabane’s dismissal, the DA agreed to support the departmental budget on higher education, essentially clearing the way for the Appropriation Bill to be passed. While this won’t be the last test for the GNU, it's a welcome sign that Budget 3.0 can now be finalised, allowing attention to shift toward the October Medium Term Budget Policy Statement (MTBPS). In a mid-week statement, the National Treasury committed to revamping its 2026 Budget process to account for changed “fiscal, institutional and political realities”. More on this in the reform tracker.
On the trade front, ahead of next week’s 1 August deadline, Trump announced another “massive” trade deal. Japan and the US agreed on a 15% reciprocal tariff, rather than the 25% that Trump initially threatened. Reports suggest that the European Union (EU) and the US are nearing a deal, also for 15%, but this has not been confirmed. Unlike other nations/regions the EU has already announced that it has a retaliatory package ready to implement, if necessary, which puts the global economy at additional risk should negotiations fail. Trump has said that 15% will probably serve as a floor for reciprocal tariffs, which means the UK was ‘lucky’ to have been able to settle at 10% early on. In addition to Japan, a deal was reached with the Philippines, with tariffs at 19%, in line with Indonesia and just below Vietnam's 20%. Important for Japan is that the deal covers automotive exports, which puts it a step ahead of countries facing the blanket 25% duty. Meanwhile, Japan’s prime minister is facing calls to resign after his Liberal Democratic Party lost its majority in the upper-house elections last weekend, after already having lost the majority in the lower-house in October last year. So far, Shigeru Ishiba says he will not resign but will reconsider later this year.
After three years of intense negotiations, the UK and India agreed on a free trade deal. A separate bilateral investment treaty is still being negotiated.
The relationship between the US and SA faced a further setback, although at the moment largely symbolic, after the House Foreign Affairs Committee passed a resolution that could allow for sanctions on corrupt officials. The bill states that SA has abandoned its relationship with the US to align with China, Russia, Iran and what it dubs to be terrorist organisations, and as such calls for a review of the relationship between SA and the US. The bill has not been voted on in the full House of Representatives, which is in recess until September. The fear is that continued anti-SA rhetoric in the US (and global) media could impact domestic tourism negatively.
The deal with Japan and hope for an agreement with the EU further buoyed global stock markets and lifted the oil price a little amid hope for increased demand. US stock markets are in part, once again, elevated by sharp movements in so-called meme stocks. These are shares that are ‘hyped up’ on social media platforms such as Reddit and traded by retail investors rather than big institutional houses.
At home, the JSE ALSI hit a 100 000 milestone on Wednesday morning. While better global and local sentiment (following the avoidance of another Budget standoff) may have pushed the JSE over the edge this week, a sustained rise in the share prices of precious metal miners, in step with precious metal prices, has played an important role in the JSE’s good performance through 2025. Indeed, while platinum dipped by about 1% w-o-w, its price is up by 53% since the beginning of the year. In contrast, the gold price edged up w-o-w and is currently 28% higher YTD. Amidst plenty of downbeat news about SA, the upward surge in the prices of these commodities provides a welcome silver lining, as it benefits net trade dynamics and could boost fiscal revenue and even investment in the mining sector, if sustained.
The usual month-end batch of local data will be released throughout the week, including the trade balance, credit growth, factory gate inflation, and budget balance – all for June. The first July data is due on Friday: the Absa PMI and naamsa vehicle sales. The manufacturing PMI showed some flicker of a recovery in June, so it will be interesting to see how this developed through July. The rate of increase in new vehicle sales has slowed, but remained solid in June, with especially cars at the lower end of the market doing well through 2025 so far.
The SA Reserve Bank (SARB’s) interest rate decision is on Thursday. We expect the SARB to cut by another 25bps, although there is a slight chance the monetary policy committee (MPC) decides to keep rates on hold. In addition to the actual decision, the SARB is expected to publish a 3% inflation scenario once again. It will be interesting to see if and how this has changed relative to May. If not mentioned explicitly in the statement, the governor is sure to be quizzed about the progress with the potential move towards a target of 3% in the Q&A afterwards. Although we deem this unlikely, as we expect the announcement to come from the Finance Minister himself, there is a slight possibility that the governor firms up timelines next week. The markets would welcome more clarity.
On the international monetary front, the US Federal Reserve (Fed) has an interest rate meeting the day before the SARB. The Fed is expected to keep rates on hold. Markets will be more interested in hearing what the Fed chair has to say about interest rate movements going forward and whether he comments on the Trump administration's continued demands for lower interest rates and his future at the Fed. The Fed’s preferred measure of price changes, the core PCE price index, will be released the day after the Fed decision. There is some expectation that it may reflect tariff pressure on prices after the earlier released CPI showed an uptick in some tariff-sensitive categories. Friday sees the nonfarm payrolls for July. Some data has pointed to signs of cooling in the labour market. Still, the nonfarm payrolls have remained fairly resilient with monthly job growth of between 100 000 and 150 000 recorded during 2025, although increasingly concentrated in fewer sectors. Half of the 147 000 jobs added in June, for example, were in the government sector. The tone of the Fed statement, the PCE print, and the jobs data could result in probability ratings for future Fed easing seesawing through the week.
The Bank of Canada (BoC) will announce its decision on Wednesday before the Fed, with no change expected. The BoC has steadily lowered its policy rate from 5% in May 2024 to 2.75% now. In contrast, if it moves next week, the Bank of Japan (BoJ) is likely to raise its policy rate from the current 0.5%. However, the general expectation is that this will only happen later in the year.
Eurozone flash consumer inflation figures for the region’s major economies will be released during the week, with the preliminary estimate for the full region due on Friday. A further slowdown from the current 2% is expected.
Initial estimates for Q2 GDP data from the US and the Eurozone are also expected. Q1 data for both economies were distorted by unusual trade dynamics in anticipation of tariff announcements. Indeed, a surge in imports pushed the US economy into a slight contraction in Q1 while the Eurozone benefitted from an exceptionally large jump in Ireland’s GDP. The Chinese PMI data for July will also be watched keenly with a possible uptick in the manufacturing print(s) now that the factory sector has had some time to adjust to the new tariff arrangement with the US. The Caixin PMI print was just above 50 points in June, but the S&P Global PMI was in negative territory.
Friday, 1 August, should also be the day the ‘new’ reciprocal tariffs kick in. However, Trump may once again TACO (chicken out), although some analysts now argue that the world may chicken out this time by not stepping up the retaliation, but merely accept what has been offered. On 31 July, the US courts will start to investigate further whether Trump is legally allowed to implement discretionary reciprocal tariffs - a ruling is not expected on the same day, of course. Trump has appealed earlier rulings against the US tariffs under the International Emergency Economic Powers Act.
SA is still negotiating and hopes to wiggle down the 30% tariff before the deadline.
I’ll be taking a short break to travel to the Wi-Fi/signal-free beauty of the Kgalagadi. In the meantime, you’ll be in the capable hands of my colleague, Tracey-Lee Solomon. By the time I return, the Weekly Review in its current form will no longer exist. As some of you know, I’ve been involved with the Weekly since 2012. Some even joke it’s like my third baby. And like any child, it has grown - and dare I say, matured - over the years. Now, it’s time for the next stage. The new Weekly Review will be expanded to include a forecast of the most important macroeconomic variables and a brief overview of how our outlook evolves through the quarter. Premium Insights clients will automatically receive the upgraded Weekly next week. Regular readers will need to sign up here to continue receiving the new, improved version, with added benefits. As always, I value your feedback - lisette@sun.ac.za
The National Treasury announced reforms to the budget process. These are designed to build consensus on the fiscal framework earlier in the process than currently. In particular, the 2025 experience was that the GNU could use the fiscal framework vote to exercise political leverage. The idea seems to be that this will lock in GNU members into the fiscal framework long before the Budget goes to Cabinet.
These are good reforms as they will improve the fiscal process. They will also potentially improve the functioning of the GNU by creating a mechanism for the GNU to engage on fiscal policy sooner rather than later. However, they do not necessarily commit GNU members to voting for the fiscal framework, so the tail risk of a collapsed budget remains.
The press did not pick up on the National Treasury’s inflation guidelines for departments, which were also released. These remain solidly anchored around a 4.5% target, with an assumption of 4.14% in 2026/27, 4.36% in 2027/28, and 4.49% in 2028/29. This indicates that the Treasury is working around an MTBPS inflation forecast of 4.5%, not 3%. However, the National Treasury needs to reflect unbiased and policy-neutral outcomes, so a potential target change could not be included in the forecast/guidelines until it is officially announced. That said, there is a risk of fiscal slippage using the current guidelines. The Treasury’s inflation planning baselines are above market consensus (including our forecast), which may create built-in real spending increases. The next time the Treasury releases its inflation forecast will be when the new-look fiscal framework comes out, which we expect to be shortly after the Quarterly Bulletin is released in the last week of September.
Tshepiso Maroga
Headline consumer price inflation (CPI) edged up to 3.0% y-o-y in June from 2.8% in May, in line with our forecast. The uptick was driven by food and non-alcoholic beverages, which increased by 5.1% y-o-y (contributing 0.9% pts) and housing and utilities, which grew by 4.4% y-o-y (adding 1% pt). The rise in food inflation was mainly driven by an acceleration in meat prices (6.6% y-o-y vs 4.4% in May) amid supply chain issues owing to avian flu and foot and mouth disease. Similarly, fats and oils (6.5% y-o-y vs 5.6%) contributed to the increase due to higher global demand for palm oil. However, food inflation is expected to unwind once supplies recover.
Declining fuel prices continue to place downward pressure on transport prices, albeit at a slower rate. Core CPI, which excludes food and fuel prices, slowed to 2.9% y-o-y in June.
The SARB’s composite leading business cycle indicator declined by 1.3% m-o-m in May, following a 0.3% drop in April. This reflects a broad-based decrease across 9 out of the 10 components. The main drags were the fall in the number of residential building plans and the volume of domestic orders received in the manufacturing sector. Meanwhile, the increase in the US-dollar-denominated export commodity price index was the only positive contributor.
Damian Maart
As expected, the European Central Bank (ECB) opted to pause its rate-cutting cycle, keeping the benchmark policy rate unchanged at 2%. The decision reflects the central bank’s assessment that inflation has stabilised around its 2% target, supported by the latest inflation data and signs of slowing wage growth. Depending on what happens on the tariff front, the ECB is expected to cut rates by 25bps later this year.
The S&P Global US Flash Composite PMI Output index rose to 54.6 in July from 52.9 in June. This was the fastest pace at which business activity expanded this year. The increase was driven by the services sector, which rose at the quickest rate since December 2024. In contrast, manufacturing expanded at a slower rate compared to June’s PMI. Both output and input prices increased in the services and manufacturing sectors due to rising labour costs and tariffs. Employment, on the other hand, rose for the fifth consecutive month, given a sharp increase in uncompleted orders, prompting increased staffing requirements. Overall, July’s PMI data points to strong economic momentum, driven by the services sector.
The Eurozone HCOB Flash Composite PMI Output Index rose by 0.4 points to 51 in July, reaching an 11-month high. Though modest, this reading indicates that business activity expanded at the fastest pace since August 2024. New orders stabilised, bringing an end to a 13-month contraction phase and prompting increased staffing requirements. This led to a fifth consecutive month of employment growth, although the pace of job creation remained unchanged from June. At the same time, input prices continued to rise, but at the slowest rate in nine months, while output prices were steady compared to the previous month. Overall, the July PMI suggests a gradual improvement in economic momentum.
Meanwhile, in Germany, the GfK Consumer Climate Indicator declined to -21.5 heading into August, down from -20.3 in July, missing expectations for a modest improvement to -19.2. The weaker reading was largely attributed to heightened economic uncertainty stemming from US trade tariffs. In contrast, the European Commission’s preliminary Consumer Confidence Indicator estimate showed a 0.6-point improvement, rising to -14.7 in July from -15.3 in June. However, this figure remains below its long-term average, suggesting that consumer sentiment across the region is still subdued.
The UK S&P Global Flash Composite PMI registered 51 in July, down one point from June. The slowdown in business growth reflects a renewed decline in new orders, which led to the sharpest reduction in staffing levels since February. Input prices rose strongly, driven by elevated wage growth, increased National Insurance contributions, and higher National Minimum Wage rates. In line with this, output prices also rose, reversing a trend of consecutive declines since April.
Editor: Lisette IJssel de Schepper
Tel: +27 (0)21 808 9755
Email: lisette@sun.ac.za
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Please refer to the glossary on the BER website for explanations of technical terms.
Friday, 25 Jul 2025
