#BERfocus

BER survey results: implications at a glance

The underlying survey results are consistent with a mild improvement in growth during Q4, even with the slight decline in the overall RMB/BER BCI

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Absa PMI December 2018

Please note, the Absa PMI for December will be released on 9 January 2019.

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Recent Releases

The study evaluates the significance of cross-border banking and international financial flows in enhancing financial deepening in the Southern African Development Community (SADC), including isolating the impact of regional, or pan-African, banks. The study also attempts to estimate the responses of the domestic financial sector to shocks in foreign banks and financial flows. Dynamic panel and general method of moments (GMM) estimations established that cross-border bank slows down development of domestic financial markets, although there are traces of positive effects in some measures. Pan-African Banks support credit development in domestic markets although diluting profitability. Impulse response and variance decomposition shows a largely negative reaction of domestic financial markets to shocks in foreign banks and financial flows in the short run, with the reaction turning positive in the long run. Indicatively, the results are demonstrating limited, but positive, financial spill-overs effects of foreign banks on financial development of other SADC countries. Pan-African Banks are still to have a significant impact in the SADC countries....Get it here

This paper compares the accuracy of the GDP growth and inflation forecasts made by private sector forecasters who participate in the annual “Media24 Economist of the Year” forecasting competition to the official forecasts of the public sector, namely, the National Treasury (NT) and the South African Reserve Bank (SARB). We include the inflation expectations as gathered through the Bureau for Economic Research (BER) quarterly survey, since these estimates constitute an integral part in informing the course of the SARB’s monetary policy decisions. Furthermore, we compare the accuracy of the aforementioned entities to the forecasts of an adaptive-naïve model that generates forecasts through the extrapolation of past actual inflation observations. This is undertaken using a combination of descriptive statistics and quantitative measures which allow for the analysis of both absolute and relative accuracy. We also undertake a non-parametric test for forecast dominance. Furthermore a deeper investigation of the relevant accuracy of public sector official forecasts compared to those made by private sectors participants, reveal that on average, over the full sample period, and with respect to both current and one year-ahead forecast, the BER have been more accurate than both the NT and the SARB....Get it here

In this paper, we extend the literature on modelling exchange rate volatility in South Africa by estimating a range of models, including some that attempt to account for structural breaks and long memory. We examine the key nominal exchange rates of the South African rand and replicate common findings in the literature; particularly that volatility is ‘persistent’. We investigate whether this ‘persistence’ is due to structural breaks or long memory, and the extent of asymmetric responses of the rand to ‘good news’ and ‘bad news’. Our results show that while long memory is evident in the actual processes, a structural break analysis reveals that this feature is partially explained by unaccounted shifts in volatility regime; the most striking finding is the remarkable fall in the estimates of volatility persistence when considerably more structural breaks than those identified in recent studies are detected and integrated into the generalised autoregressive conditional heteroscedasticity (GARCH) framework. Furthermore, the asymmetric GARCH model results provide evidence of leverage effects, indicating that negative shocks imply a higher next period volatility than positive shocks. The empirical results also shed light on the timing and likely triggers of volatility regime switching....Get it here

Any African countries experience power shortages and regular interruptions in electricity supply. We use stochastic frontier models to study the impact of power disruptions on the efficiency of African manufacturing firms. Power disruptions appear to have negative effects on efficiency and the use of generators further exacerbates the impact. The interaction of power outages with generator ownership result in a negative effect on efficiency and this could probably be explained by the high cost of running these alternative power sources. Our results support a policy of investment in the electricity sector, to improve the maintenance and quality of infrastructure that is used to generate power in African countries....Get it here

The FNB/BER Civil Confidence Index gained one point to register a still very depressed level of 18 in 2018Q4. Underpinning the low confidence was a significant decline in construction activity as well as a deterioration in order books. ...Get it here

The FNB/BER Civil Confidence Index gained one point to register a still very depressed level of 18 in 2018Q4. Underpinning the low confidence was a significant decline in construction activity as well as a deterioration in order books. ...Get it here

Dominating the domestic headlines last week was the news that South Africa exited a technical recession in 2018Q3. While this was widely expected, the pace of GDP growth surprised on the upside. More on this in the domestic section. After the release of some survey data for the fourth quarter (see domestic section for details), a spate of actual activity data releases this week will provide further guidance on how GDP growth performed in 2018Q4. On the international front, US employment data rose by less than expected in November while the international trade balance data for October recorded the biggest deficit in ten years. This, as well as PMI data from China, is discussed here. ...Get it here

According to the 2018Q4 BER Retail Survey, business confidence among retailers improved somewhat following the significant deterioration recorded in the third quarter of 2018. Confidence was supported by higher sales volumes and a slight improvement in overall profitability. However, trading conditions remain tough with no meaningful pick-up expected over the festive season....Get it here

This month, we have made minor adjustments to the oil price, rand exchange rate and inflation forecasts. ...Get it here

According to the Absa manufacturing survey, manufacturing business confidence ticked up by 4 index points to 30 in the fourth quarter of 2018. This was 11 points below the long-term average level, which means this was a fairly weak confidence reading....Get it here

Forecast publications

This month, we have made minor adjustments to the oil price, rand exchange rate and inflation forecasts. ...Get it here

Excel sheets summarising the forecasts published in the latest issues of Economic Prospects (2-year quarterly forecast) and Economic Outlook (6-year annual forecast). Where possible, the forecast sheets have been updated with the latest available information.

...Get it here

Excel sheets summarising the forecasts published in the latest issues of Economic Prospects (2-year quarterly forecast) and Economic Outlook (6-year annual forecast). Where possible, the forecast sheets have been updated with the latest available information.

...Get it here

A monthly check on the forecast and latest data fact sheet, supplementing the BER’s quarterly forecast of the SA economy...Get it here

In April, our six-year forecast assumed greater policy certainty and direction after the 2019 election. However, recent events open the door for a more prolonged period of uncertainty about the domestic policy outlook. In line with this, the medium-term GDP growth outlook has been revised (slightly) lower....Get it here

The domestic economy entered a technical recession in 2018Q2. The excitement that gripped the country in 2018Q1 is now firmly in the rear-view mirror. The short-run outlook for the domestic economy is clouded by low levels of private sector confidence, a subdued consumer demand environment, weak private sector fixed investment, and constrained fiscal and monetary policy. Add to that creeping concerns regarding global growth, and we are far less optimistic about the short-term outlook than in early-2018....Get it here

The domestic economy entered a technical recession in 2018Q2. The excitement that gripped the country in 2018Q1 is now firmly in the rear-view mirror. The short-run outlook for the domestic economy is clouded by low levels of private sector confidence, a subdued consumer demand environment, weak private sector fixed investment, and constrained fiscal and monetary policy. Add to that creeping concerns regarding global growth, and we are far less optimistic about the short-term outlook than in early-2018....Get it here

Medium-term prospects for the SA economy have improved. Mostly, this stems from notably less concern about domestic politics and the policy environment....Get it here

Snapshot

Graphs of the latest monthly and quarterly South African economic and financial data. The focus is on the essential indicators to give the reader a quick overview of general economic conditions....Get it here

Graphs of the latest monthly and quarterly South African economic and financial data. The focus is on the essential indicators to give the reader a quick overview of general economic conditions....Get it here

Graphs of the latest monthly and quarterly South African economic and financial data. The focus is on the essential indicators to give the reader a quick overview of general economic conditions....Get it here

Graphs of the latest monthly and quarterly South African economic and financial data. The focus is on the essential indicators to give the reader a quick overview of general economic conditions....Get it here

Graphs of the latest monthly and quarterly South African economic and financial data. The focus is on the essential indicators to give the reader a quick overview of general economic conditions....Get it here

Graphs of the latest monthly and quarterly South African economic and financial data. The focus is on the essential indicators to give the reader a quick overview of general economic conditions....Get it here

Weekly

Dominating the domestic headlines last week was the news that South Africa exited a technical recession in 2018Q3. While this was widely expected, the pace of GDP growth surprised on the upside. More on this in the domestic section. After the release of some survey data for the fourth quarter (see domestic section for details), a spate of actual activity data releases this week will provide further guidance on how GDP growth performed in 2018Q4. On the international front, US employment data rose by less than expected in November while the international trade balance data for October recorded the biggest deficit in ten years. This, as well as PMI data from China, is discussed here. ...Get it here

In the domestic section we unpack the latest BER consumer and business confidence numbers. The latest reading for the Absa Purchasing Managers’ Index (PMI) and producer price inflation figures for October are also discussed. On the international front, PMI data confirms that Chinese growth continues to slow, while comments by US Federal Reserve officials point toward a possibly more dovish interest rate stance for the US central bank....Get it here

On the domestic front, the main focus was on the South African Reserve Bank’s (SARB) monetary policy decision last week. The SARB decided to hike the interest rate by 25 basis points (bps) after a rigorous debate. The decision mainly hinged on sustained higher inflation going forward (with further upside risks) and the bank hoping to prevent more aggressive rate hikes in the future by acting now. On a positive note, the Brent crude oil price continued its steady decline last week, which means local consumers may see some relief on the petrol price front next month – see the markets section. In the international section, we unpack the latest flash Purchasing Managers’ Index (PMI) figures from the Eurozone and the US. The PMI suggests that growth is continuing to trend lower in the Eurozone, but remains solid in the US. The section also briefly refers to the Brexit deal endorsed by the European Union (EU) over the weekend. ...Get it here

In market news, the rand exchange rate took the Constitutional Review Committee’s decision to propose an amendment to Section 25 of the Constitution to allow expropriation without compensation (EWC) in its stride. Globally, the focus was on the chaotic Brexit negotiations. On the data front, we unpack the latest retail, wholesale and motor trade data in the domestic section. Sales came in stronger than expected across most categories. Combined with an expected improvement in agricultural output and the rebound in manufacturing output, this should help lift the economy out of recession in Q3. In the international section we discuss the latest GDP data out of Germany and Japan, along with inflation data from the US and the UK. ...Get it here

In the absence of major market-moving local data releases last week, South African financial market moves were dominated by gyrations on global markets. In the domestic section, we unpack the latest mining and manufacturing output data from Statistics South Africa (Stats SA). The September prints confirm our view that the economy likely exited the technical recession in Q3, but growth is expected to have remained weak. On the international front, the focus is on the latest monetary policy decision by the US Federal Reserve (Fed), UK GDP figures as well as the latest international trade data from China. The Chinese trade data reflected strong growth in exports, which is set to slow when additional US trade tariffs likely kick in early next year. The markets section explains the drivers of the see-sawing rand exchange rate, which managed to dip below R14/$ mid-week, but weakened again at the end of the week. ...Get it here

Various domestic economic indicators were published last week - mostly reflecting tough conditions. On the negative side, the unemployment rate increased, the trade balance swung into a deficit and the Absa PMI declined. An increase in the sale of commercial vehicles was the exception on the positive side. Internationally, preliminary indications are that the Eurozone economy continued to lose momentum in the third quarter. Meanwhile, policy makers at the central banks of Japan and the UK made no changes to their key interest rates. Lastly, in the US, nonfarm payroll data signalled a healthy labour market with rising wages, enforcing expectations for another Federal Reserve Bank (Fed) policy rate hike in December. In financial markets, the domestic equity market tracked global bourses higher to recover strongly from recent losses....Get it here

The FNB/BER Civil Confidence Index gained one point to register a still very depressed level of 18 in 2018Q4. Underpinning the low confidence was a significant decline in construction activity as well as a deterioration in order books.

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) rose to 49.5 index points in November from 42.4 in October. This was the PMI’s first increase after three straight months of declines and brought the index to the best level since July 2018. The improvement was broad based with four out of the five main subcomponents rising compared to the previous month. However, despite the improvement, the PMI remains below the neutral 50-point mark which suggests that the sector remains under pressure

The FNB/BER Building Confidence Index shed 3 index points to register a level of 32 in 2018Q4. Of the four sub-sectors which reported lower confidence, the sharp increase in pessimism among architects and quantity surveyors was of particular concern. This was underpinned by a marked fall in activity

Consumer confidence levels deteriorated substantially during 2018Q3, with the FNB/BER Consumer Confidence Index (CCI) falling from +22 in the second quarter to +7 in the third quarter. Consumer sentiment deteriorated across all income groups, but the drop in confidence levels of low-income consumers was particularly severe. A confluence of adverse economic developments in all likelihood deflated the confidence levels of consumers in recent months. Despite the negative correction in consumer sentiment during the third quarter, the latest CCI reading still reflects an above-average level of optimism.