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The Energy Availability Factor (EAF) has recovered, rising to 65%. While this is an improvement, it is still 5% pts lower than the same week last year. Unplanned outages have also improved, but remain higher than the equivalent week. At this stage, it seems that load-shedding will not recur this winter.
The Department of Energy and Electricity announced that the first stages of the independent power transmission process had kicked off. Requests for Pre-Qualifications were put out for qualifying parties. This programme is a critical next step in the electricity reform process as it will crowd in private sector investment into grid infrastructure. The scale and scope of the projects are as yet unclear.
Last Friday, government approved an additional R48.6 billion guarantee for Transnet to cover debt redemptions over the next five years. Given recent ratings actions, it also approved R46.2 billion for it to mitigate the risks of such ratings actions on its debt. This additional guarantee support for Transnet amounts to R94.8 billion.
This followed government’s approval of an allocation of R51 billion in guarantees to Transnet on 22 May 2025. The allocation comprised R41.0 billion for the funding requirements for 2025/26–2026/27, and R10.0 billion for liquidity management purposes.
It is unclear to what extent these guarantees have been linked to ongoing and important reform initiatives at Transnet, particularly port and rail reforms. It also represents a significant increase in contingent liabilities for National Treasury.
As expected, the South African Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC) decided to lower the interest rate by 25 basis points (bps) at its latest meeting. The unanimous decision brings the repo rate to 7% and the prime rate to 10.5%. A key takeaway from the MPC press conference was the announcement that future MPC decisions would be anchored around the lower bound of the 3-6% target band. SARB Governor Lesetja Kganyago noted that this was not an official change in the target, as would mandate approval from National Treasury; it is rather the preference of the SARB, much as was the move to 4.5%. June consumer inflation was in line with the preferred rate; however, the SARB expects inflation to pick up over the next few months. Looking ahead, the SARB’s Quarterly Projection Model (based on the newly adopted 3% target) suggests five more cuts over the medium term. However, the MPC is not beholden to the QPM.
According to Stats SA, the producer price index (PPI) rose by 0.6% year-on-year (y-o-y) in June, up from 0.1% in May. The uptick was primarily driven by higher producer prices for food, beverages and tobacco products, which increased by 4% y-o-y and contributed 1.2 percentage points (% pts) to overall producer inflation. In contrast, prices for coke, petroleum, chemical, rubber and plastic products declined by 4.7% y-o-y, subtracting 1% pt. On a monthly basis, PPI rose by 0.2% in June.
According to the US Bureau of Economic Analysis (BEA), initial estimates show the US economy expanded by 3% quarter-on-quarter (q-o-q) annualised in the second quarter, up from a 0.5% contraction in Q1. The rebound was largely driven by a sharp 30.3% drop in imports, following a 37.9% surge in Q1 as businesses and consumers rushed to buy goods ahead of anticipated tariff-driven price increases. Consumer spending was the biggest contributor to growth, while fixed investment was the largest detractor.
The following day, the Federal Reserve (Fed) kept interest rates unchanged at 4.25%- 4.5% for the fifth consecutive meeting, as expected. Despite the bumper Q2 growth print and in contrast to previous assessments, the Fed noted that recent indicators suggest a moderation in economic activity in the first half of the year amid fluctuations in imports. Continued uncertainty around both the inflation and economic outlooks leaves the Fed in “wait-and-see” mode, much to the chagrin of the US President.
Labour market data released this week also showed some weakness. US job openings declined by 275 000 to 7.4 million, falling short of expectations. Notable decreases occurred in accommodation and food services (-308 000), healthcare and social assistance (-244 000), and finance and insurance (-142 000). Meanwhile, retail (190 000), information (67 000), and state and local government education (61 000) saw an increase in job openings.
Finally, the Fed’s closely watched measure of inflation, the core PCE price index (which excludes food and energy prices), remained above the Fed’s target at 2.8%, slightly above expectations.
According to preliminary data, the Eurozone’s (EZ) economy grew by just 0.1% q-o-q in Q2, a slowdown from the 0.6% growth in Q1. Despite surpassing market expectations of no growth, it was the slowest expansion since late 2023. The slowdown reflects caution on the part of consumers and businesses, who are balancing rising trade uncertainties, and decreasing inflation and lower borrowing costs. With growth rates of 0.7% and 0.3% q-o-q, respectively, Spain and France outperformed the other major economies in the region.
The EZ unemployment rate remained stable at a record low of 6.2% in June, below market expectations. The number of unemployed people dropped to 10.7 million, a decrease of 62 000 from the previous month. In the meantime, the youth unemployment rate, which represents job seekers under 25, declined from a downwardly revised 14.3% in May to 14.1%, its lowest level since April.
In Germany, retail sales rose by 1% m-o-m in June, rebounding from a downwardly revised 0.6% decline in May. The figure exceeded market expectations and marked the first monthly gain since March. The drivers of the increase were food (0.3% m-o-m) and non-food categories (1.8%). Additionally, online sales jumped by 9% m-o-m. On an annual basis, retail sales grew by 4.9%, accelerating from an upwardly revised 2.6% increase in the previous month.
The July NBS Manufacturing PMI declined to 49.3 from 49.7 in June, reflecting the fourth consecutive month of contraction. The decline was driven by a fall in new orders, foreign sales and slower output growth. Meanwhile, the non-manufacturing PMI dropped to 50.1 in July from 50.5. The latest figures indicate increasing signs of slowing economic momentum, the effects of unfavourable weather conditions and rising trade uncertainty due to steep US tariffs.
Likewise, the Caixin China General Manufacturing PMI, or private sector PMI, fell to 49.5 index points in July. The unexpected contraction (its second in three months) was driven by a sharper decline in new export orders, a decrease in output and employment, and a slowing of new orders growth. On the price front, input cost prices rose while selling prices continued to decline.
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Friday, 01 Aug 2025
