The FNB/BER Civil Confidence Index gained 5 points to register a level of 40 in 2017Q1. The higher confidence was supported by a slight improvement in construction activity. However, profitability remained under pressure.

The seasonally adjusted Absa Purchasing Managers’ Index (PMI) slumped in April 2017, after a solid performance during the first quarter of 2017. The index fell to 44.7 index points from an average of 51.9 during the first quarter. The decline was relatively broad based, with key subcomponents measuring business activity and inventories slumping to multi-year lows. While the deterioration is worrying, the magnitude of the drop may not be reflected fully in official data as actual growth was already weaker in January and February than signalled by the higher PMI readings. Nonetheless, the survey suggests that the sector experienced a rough start to the second quarter of 2017.

The FNB/BER Building Confidence Index improved for the third consecutive quarter, rising by 3 points to 43 in 2017Q1. This marks the highest confidence in more than a year. However, despite the higher confidence, building activity was broadly lower, especially for main contractors.

After rebounding from -11 index points in 2016Q2 to -3 in 2016Q3, the FNB/BER Consumer Confidence Index (CCI) sagged back to -10 in 2016Q4. The deterioration in consumer sentiment during 2016Q4 came on the back of a reversal in the gains that were made during the third quarter for the two forward-looking sub-indices of the CCI.

Economic indicators

Key indicators

Fri May 26 2017 22:36:06

Rand-Dollar

12.8654

-0.42%

Rand-Pound

16.4790

-1.35%

Rand-Euro

14.3757

-0.74%

Gold

1267.01

0.96%

Platinum

959.50

1.53%

Brent Crude EOD

52.01

-3.61%

R186

8.50

0bps

R207

7.40

0bps

Share indices (Previous day's close)

Last updated: Fri May 26 2017 08:20:09

JSE all-share

54028

-0.52%

JSE Top 40

47572

-0.52%

US S&P 500

2415

0.44 %

German Dax

12622

-0.17%

Japan Nikkei

19813

0.36 %

Please note

BER SCHOLARSHIPS

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Recent releases

The domestic section focuses on the trade sector this week. Both real retail and wholesale sales improved on a monthly basis in March. Concerning the first quarter, these improvements were not enough to offset notable contractions in the first two months of 2017. Internationally, the focus falls on the Eurozone (EZ) where consumer confidence edged up to its highest level in a decade. Then the focus turns to Russia, a BRICS partner of SA. Russia recently emerged from a deep recession induced by lower energy prices. Lastly, the markets section highlights the oil price which increased last week, following talks of Russia’s cooperation with OPEC to extend production cuts. ...Get it here

Last week saw the release of March mining and manufacturing data. With the release of the March data, we have the first full set of real economic data for 2017Q1. In sum, it seems that a technical recession will likely be avoided. In other words, GDP growth in 2017Q1 should be positive, mainly due to a sharp recovery in mining production in March and despite the continued weakness in the manufacturing sector. On the international front, the Bank of England (BoE) kept their interest rate unchanged following their meeting last week. More importantly, the BoE made revisions to both the GDP and inflation outlook largely due to the expected impact of Brexit. ...Get it here

Monthly survey of leading South African economists who forecast key macroeconomic variables....Get it here

A slew of domestic economic data was released over the past two weeks. While the trade data for 2017Q1 was encouraging, two data releases for the first month of Q2 disappointed. The high number of public holidays during April may have played a role, but the soft data likely also reflects a deterioration in the economic environment after the controversial cabinet reshuffle and subsequent sovereign credit rating downgrades. Internationally, the key focus was on the French election that took place yesterday. Early indications are that Emmanuel Macron won comfortably from anti-Europe Marine Le Pen. On the data front, the focus was on the US nonfarm payrolls for April after the US Federal Reserve opted to keep the policy interest rate unchanged earlier in the week. The data confirms that a rate hike is likely on the cards for June. ...Get it here

The performance of the South African manufacturing sector has remained dismal after an initial recovery from the economic recession in 2008/09. This short comment unpacks the most recent manufacturing output data and delves into some of the underlying reasons why, despite an apparent alleviation of supply-side constraints through last year, manufacturing output has continued to disappoint....Get it here

According to theory, return rates are expected to have no memory, meaning that return rates do not show autocorrelation. Most studies find evidence of absence of linear autocorrelations, although other types of dependence exist. This paper analyzes the existence of long range dependence in G7 stock markets, applying two different methodologies which allow nonlinear behavior of return rates: mutual information and the correlation coefficient calculated from detrended cross-correlation analysis. We apply these methodologies to stock markets, calculating them for the first ten lags of each time series. It is possible to conclude on the existence of nonlinearity and long-term dependence in return rates for the seven indexes studied....Get it here

One of the most significant changes in the South African retail landscape over the past few decades is the increase in the number and size of retail shopping centres situated in, or close to, residential areas. These shopping centres have the potential to generate both positive and negative externalities which may, in turn, be capitalised into adjacent residential property prices. However, policy makers are still unsure as to the effect of commercial land uses such as shopping centres on surrounding property prices. This study sheds light on this issue by considering the effect of the Walmer Park Shopping Centre, situated in Nelson Mandela Bay, on surrounding residential property prices. The results of this study indicate that, in the case of the Walmer Park Shopping Centre, a positive impact is exerted on the property values of adjacent houses....Get it here

Risk management tools, such as value-at-risk (VaR) and expected shortfall (conditional value-at-risk) are highly dependent on an appropriate set of underlying distributional assumptions being made. Identifying a distribution that best captures all aspects of financial data sets may benefit both investors and risk managers. In this study, we compare the relative performance of the GARCH-generalized Pareto distribution and the GARCH-Pearson type-IV models in estimating value-at-risk of the South African mining index returns. VaR and backtesting are performed via Kupiec likelihood ratio test. The proposed models capture some key stylized facts associated with daily index returns; e.g. heavy tails (non-normality), asymmetry, volatility clustering and their leverage effect. The advantage of the proposed models lies in their ability to capture conditional heteroscedasticity in the returns through the GARCH framework and at the same time model their heavy tail behaviour through the generalized Pareto distribution (GPD) and the Pearson type-IV distribution. The main findings indicate that the GARCH-GPD and GARCH-Pearson type-IV models give better results when compared with generalized hyperbolic distributions (GHDs), thereby providing a good alternative candidate for modelling financial returns. The accuracy of the volatility model is essential in forecasting volatility of future returns in which the predictability of volatility plays an integral role in risk management and portfolio management....Get it here

This research note identifies the period when South African prices began to move in unison with those of the country’s lead trading partner. We find that South African wheat prices started reflecting UK trends soon after the discovery of diamonds and gold in the interior of the country. The mineral revolution, it seems, was responsible for integrating the broader South African economy – here proxied by agricultural prices – into the global economy. We further show that this integration was not confined to Cape Town; the coming of the railways ensured that markets in the larger Western and Eastern Cape and, importantly, the town of Kimberley, were well integrated with those in Cape Town. We therefore establish the start of South Africa’s integration into the global market economy in the 1870s....Get it here

Prior studies in agricultural and forestry economics that employ Blinder decomposition methods assume that each of the samples compared is characterized by a single regression function. The present study is the first to relax this assumption in order to allow for the existence of latent classes represented by different regression functions hidden within each sample. More specifically, we introduce the use of a latent-class or finite-mixture model to serve as a basis for Blinder-Oaxaca decompositions. Our method is applied to hunting land lease data from Mississippi (U.S.), and our results indicate that both the east and west regions of this state are best characterized by three regression functions, resulting in a total of fifteen possible pairwise decompositions. This finding allows us to decompose differences between two different east regimes or two different west regimes, in addition to the usual east-west decompositions. Our results reveal that a traditional prior analysis of these data characterizes (fails to characterize) about 35 percent (65 percent) of the sample. Our latent-class approach to decompositions can be applied to any circumstance where decompositions are needed and where model specification concerns loom large....Get it here

Forecast publications

The repercussions of President Jacob Zuma’s cabinet reshuffle on March 31, and the subsequent credit rating downgrades, are likely to be felt through the medium-term forecast period (2017 to 2022). These developments will undoubtedly further constrain the medium-term prospects for the SA economy. Indeed, notable forecast adjustments include that we now expect almost no increase in SA per capita GDP over the next six years and slippage on fiscal debt metrics....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

Global growth appears to be on a stronger footing in early-2017. However, domestic constraints have once again come into play and appear to be preventing the SA economy from fully benefiting from improving global conditions. As a result, GDP growth is projected to remain well below 2% over the forecast horizon....Get it here

Global growth appears to be on a stronger footing in early-2017. However, domestic constraints have once again come into play and appear to be preventing the SA economy from fully benefiting from improving global conditions. As a result, GDP growth is projected to remain well below 2% over the forecast horizon....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

Our updated forecast is for average SA GDP growth of a modest 1.8% during 2016-21. The average is depressed by weak 2016 and 2017 numbers - growth of 2.4% is pencilled in for 2018-21. While still subdued, this is on par with the (modest) performance of 2010-15. ...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

The domestic section focuses on the trade sector this week. Both real retail and wholesale sales improved on a monthly basis in March. Concerning the first quarter, these improvements were not enough to offset notable contractions in the first two months of 2017. Internationally, the focus falls on the Eurozone (EZ) where consumer confidence edged up to its highest level in a decade. Then the focus turns to Russia, a BRICS partner of SA. Russia recently emerged from a deep recession induced by lower energy prices. Lastly, the markets section highlights the oil price which increased last week, following talks of Russia’s cooperation with OPEC to extend production cuts. ...Get it here

Last week saw the release of March mining and manufacturing data. With the release of the March data, we have the first full set of real economic data for 2017Q1. In sum, it seems that a technical recession will likely be avoided. In other words, GDP growth in 2017Q1 should be positive, mainly due to a sharp recovery in mining production in March and despite the continued weakness in the manufacturing sector. On the international front, the Bank of England (BoE) kept their interest rate unchanged following their meeting last week. More importantly, the BoE made revisions to both the GDP and inflation outlook largely due to the expected impact of Brexit. ...Get it here

A slew of domestic economic data was released over the past two weeks. While the trade data for 2017Q1 was encouraging, two data releases for the first month of Q2 disappointed. The high number of public holidays during April may have played a role, but the soft data likely also reflects a deterioration in the economic environment after the controversial cabinet reshuffle and subsequent sovereign credit rating downgrades. Internationally, the key focus was on the French election that took place yesterday. Early indications are that Emmanuel Macron won comfortably from anti-Europe Marine Le Pen. On the data front, the focus was on the US nonfarm payrolls for April after the US Federal Reserve opted to keep the policy interest rate unchanged earlier in the week. The data confirms that a rate hike is likely on the cards for June. ...Get it here

The domestic economic data calendar was relatively busy last week, with key data releases from Statistics South Africa painting a mixed picture for the 2017Q1 GDP outlook. On the one hand, mining output came out much better than expected, but manufacturing production disappointed. These releases, as well as the latest consumer inflation and retail sales data, are discussed in the domestic section. In the international section we review the preliminary Purchasing Managers’ Index (PMI) figures for Europe and the US as well as the 2017Q1 GDP data from China. The markets section provides an overview of the initial market reaction to French first round election results, focussing on the impact on the rand exchange rate. ...Get it here

In the domestic and markets sections we unpack the consequences of the credit rating downgrades by S&P Global Ratings and Fitch Ratings. US jobs data and Chinese purchasing managers’ indices are discussed in the international section....Get it here

Domestic political developments overshadowed economic events last week. This started on Monday when the former Minister of Finance Pravin Gordhan and his deputy were recalled from an investor roadshow and culminated in a cabinet reshuffle (which saw both of them ousted from their positions) late Thursday evening. Markets immediately reacted, particularly with regards to the rand (see markets). In the domestic section, we unpack the latest producer price inflation data, the interest rate announcement on Thursday and the latest Absa Purchasing Manager’s Index (PMI). The key message from these is that domestic price pressures seem to be easing. Major economic data releases were rather sparse on the international front. Final GDP data for some of the larger economies were released, but these were largely unchanged from previous estimates. The focus in the international section is on China’s official PMI and US consumer data. ...Get it here