The FNB/BER Civil Confidence Index gained 13 points to register a level of 41 in 2016Q2. This returns the index to more or less the same level as registered in 2015Q4. Despite the higher confidence, the current level of the index indicates that close to 60% of respondents are dissatisfied with prevailing business conditions.

The seasonally adjusted Barclays Purchasing Managers’ Index (PMI) fell by 1.2 index points to 52.5 in July. Despite the slight drop, the current level still signals that the sector experienced a reasonably strong start to the third quarter after a robust performance during Q2. The Barclays PMI remains in line with recent Eurozone manufacturing PMI readings (a key export market for locally produced goods).

After remaining unchanged at 36 in the first quarter, the RMB/BER Business Confidence Index (BCI) fell to 32 in the second quarter. Confidence is now at its lowest level since the fourth quarter of 2009, when the index was 28. Regarding the five sectors making up the BCI, confidence fell sharply among retailers. Looking forward to the second quarter, the latest RMB/BER BCI survey results are worrying, with the already weak and all-important trade sector showing few, if any, signs of improvement.

Having edged up in 2016Q1, the FNB/BER Consumer Confidence Index (CCI) slumped back to -11 in 2016Q2. The second quarter decline and exceedingly low level of the FNB/BER CCI mirrors the deterioration in the RMB/BER business confidence index during 2016Q2. Given that inflation is set to accelerate further on the back of the drought-induced rise in domestic grain prices and sustained weak rand exchange rate, the purchasing power of most households will likely weaken further in coming months, weighing on consumer spending.

Economic indicators

Key indicators

Mon Aug 29 2016 16:37:02

Rand-Dollar

14.4527

1.32%

Rand-Pound

18.8865

0.93%

Rand-Euro

16.1346

1.10%

Gold

1321.10

0.10%

Platinum

1074.50

0.70%

Brent Crude EOD

49.64

0.54%

R186

9.03

8bps

R207

8.26

6bps

Share indices (Previous day's close)

Last updated: Mon Aug 29 2016 08:11:34

JSE all-share

53507

0.04 %

JSE Top 40

46807

0.10 %

US S&P 500

2169

-0.16%

German Dax

10588

0.55 %

Japan Nikkei

16361

-1.18%

Please note


Recent releases

In domestic news, consumer price inflation moderated by more than expected in July, while producer prices increased at a faster pace. The inflation numbers, together with the implications for monetary policy, are discussed in the domestic section. On the international front, comments made by US Federal Reserve (Fed) chair Janet Yellen suggest that a US interest rate hike before year-end is back on the cards. Additionally, we reflect on economic activity in the US and the Eurozone (EZ) as measured by the preliminary Purchasing Managers’ Index (PMI) readings for August....Get it here

On the domestic front, data released by Statistics South Africa (Stats SA) showed that the trade sector expanded during 2016Q2 despite monthly declines in both retail and wholesale sales in June. Together with the positive mining and manufacturing data for the second quarter, the better performance of the trade sector should boost Q2 GDP growth. For more detail, see the domestic section. In international news, the minutes from the US Federal Reserve’s (Fed) July meeting confirm the view that US interest rates could remain unchanged until at least December. This view was further supported by a subdued July inflation print. The Fed minutes, together with inflation prints from the US and the Eurozone, are discussed in the international section....Get it here

The Insider Trading Act of 1999 and Johannesburg Stock Exchange (JSE) regulations require transparency in director dealings. Directors are required to report all share trading in companies of which they are principals, and this information has been regarded as a signal to the market. We examine the value of this information, using 13 840 director trades and a portfolio time series approach from 2002 to 2013. Whereas most studies have used an event study methodology, we treat the problem primarily as an investment style, and using a trading rule approach we optimise the look-back and holding periods to show statistically and economically significant returns for investors who mimic director trades. When directors of companies report net acquisitions of shares over the preceding three months, investors who then purchase an equal weighted portfolio of the same shares, and hold these for four months, would have achieved an annualised return of 24.3% after transaction costs. When directors of companies report net disposals of shares over the preceding three months, investors who purchase a portfolio of the same shares, and hold these for three months, would have achieved an annualised return of 21.0% after transaction costs. Both of these strategies out-performed the comparable equal weighted benchmark return of 19.1% pa over the same period. We triangulate these results using an event-study methodology, and whilst we find similar results for investors following a directors’ purchasing strategy, the event study methodology shows that investors who purchase shares following a directors’ selling strategy would underperform. In both instances, the style analysis reveals that imitating directors’ trading lacked persistence after the global financial crisis of 2008, and we would not recommend either strategy....Get it here

Obesity is a growing health problem in South Africa. This health problem could have various implications for the South African economy. The aim of this paper is to investigate the impact of obesity on employment status in South Africa with the use of household survey data. The paper follows a quantitative research design that involves household survey data analysis through the use of a bivariate probit model to validate the relationship between obesity and employment. Data from the National Income Dynamic Study (NIDS), administered by the Southern African Labour and Development Research Unit (SALDRU), is used. The findings suggest that obesity has a negative impact on employment status in South Africa....Get it here

This study explores the value of information transmission in training heterogeneous Artificial Neural Network (ANN) models to identify patterns in the growth rate of aggregate per-capita consumption spending in New Zealand. A tier structure is used to model how information passes from one ANN to another. A group of ‘tier 1’ ANNs are first trained to identify consumption patterns using economic data. ANNs in subsequent tiers are also trained to identify consumption patterns, but they use the patterns constructed by ANNs trained in the preceding tier (secondary information) as inputs. The model’s results suggest that it is possible for ANNs downstream to outperform ANNs trained using empirical data directly on average. This result, however, varies from time period to time period. Increasing access to secondary information is shown to increase the similarity of heterogeneous predictions by ANNs in lower tiers, but not substantially affect average accuracy....Get it here

Recent international evidence on the Variance Risk Premium, defined as the difference between implied and realised return variation, shows that this metric has predictive power in forecasting aggregate stock market returns. This evidence seems to be strongest for the US market. In this article we conduct a study on the ability of the Variance Risk Premium to predict aggregate stock returns for both the US market and the South African market, allowing us to contrast our South African results against the US. Our empirical study using US data confirms the predictive power of the Variance Risk Premium in the US market. The evidence from our empirical study in the South African market however reveals little or no predictive power of South African market returns, even when combined with typical economic predictor variables. Thus the use of a South African Variance Risk Premium for predictive purposes in the South African environment is currently not supported by this research. Our analysis does however suggest that the US VRP does have some predictive power for the SA stock market, but that this relationship is period dependent and might not persist into the future....Get it here

Domestically, the focus last week was on the outcome of the Municipal Elections. New vehicle sales data and capacity utilisation in the manufacturing sector are also discussed. On the international front, the most important release was the non-farm payroll data in the US. The figure was much stronger than anticipated which suggests an increased probability of the US Federal Reserve hiking the policy interest rate in 2016, possibly in September already. Across the Atlantic, monetary policy in the UK was eased more aggressively than expected. The monetary policy easing is despite a higher inflation outlook on the back of the weaker sterling. ...Get it here

This paper evaluates the forecasting accuracy of private sector forecasters who participate in the annual “Media24 Economist of the Year” forecasting competition in South Africa. Our primary aim is to examine whether the accuracy of private sector forecasters improved over time, particularly their ability to predict the 2008/2009 recession and whether there was a distinct change in forecasting accuracy along this turning point of the business cycle. Our estimates from a forecasting error measure known as Theil’s U-Statistic show that, on the average, the Root Weighted Mean Squared Error (RWMSE) of the growth forecast for the current period was 0.62 of an adaptive-naïve forecast, whereas the inflation forecast was 0.71 of an adaptive-naïve forecast. In order to determine whether there was an improvement in forecasting accuracy after the recession, we segregate the sample period along this break date and compare the size of the forecast errors between the two periods. To this end, we find that with respect to the growth predictions, there was a marginal reduction in the magnitude of the forecasting errors. However, in the case of inflation forecasts (both current and year-ahead), there was a marked reduction in the size of both the RWMSE and Theil’s U-Statistic, implying that the post recessionary period was characterized by an improvement in accuracy of inflation forecasts made by the private sector. Furthermore, with respect to year-ahead forecasts, the results from both the non-parametric and the more formal parametric test allows us to reject the hypothesis of equality between the mean squared errors of the competing forecasts. Although the private sector forecasters were unable to accurately predict the recession, they were at the least able to produce forecasts that were more accurate than the adaptive-naïve model....Get it here

This study examines the overreaction hypothesis wherein investors overweight current events and underweight historical information. It tests whether price-based overreaction is present on the cross-section of shares on the JSE and further attempts to identify whether overreaction can be used as a blanket theory for both long-term reversal and the value premium. The authors examine monthly price and accounting data of all JSE listed shares over the period 1 January 1998 to 30 June 2013. The results show that profits attributable to historical winner portfolios decline while historical loser portfolios begin generating returns in excess of their winner counterparts as holding periods are extended beyond 12 months. The findings contradict previous literature as the interaction between long-term reversal and value (proxied by book to market) appears to be weak. Over the sample period, the best performing portfolios were the high value, high momentum portfolios while the most consistent evidence of long-term reversal was found in the medium value extreme loser portfolios. This is the first study to investigate the interaction between the value premium and long term reversal on South African data. This study improves on earlier research by employing the zero daily trade liquidity filter and combining price-based and accounting-based tests to isolate the effect of overreaction....Get it here

In the domestic section, we unpack mining and manufacturing output figures for June. The solid monthly growth figures suggest that the SA economy avoided a technical recession in the first half of 2016. The better-than-expected local data, as well as a weaker US dollar in general, helped lift the rand to fresh 2016 highs last week. On the international front, US retail sales came out weaker than expected. Coupled with benign inflation figures, this means that US interest rates could remain on hold for longer. In China, there may be further monetary easing as consumer inflation moderated and activity indicators deteriorated in July....Get it here

Forecast publications

Both global and domestic dynamics suggest that SA GDP growth will remain poor for the rest of 2016. GDP is expected to decline by 0.2% in 2016 versus the previous forecast for growth of 0.4%. There is a high probability of a technical recession in the second half of the year....Get it here

Both global and domestic dynamics suggest that SA GDP growth will remain poor for the rest of 2016. GDP is expected to decline by 0.2% in 2016 versus the previous forecast for growth of 0.4%. There is a high probability of a technical recession in the second half of the year....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

Our latest six-year forecast can be divided into two distinct periods. The short-term prospects for the economy are decidedly downbeat with global and (increasingly) domestic factors conspiring to depress growth to well below potential levels in 2016 (0.4%) and 2017 (1.3%). Over the medium term, GDP growth is forecast to recover to an average of 2.8% between 2019 and 2021. We modelled a risk scenario of multiple credit rating downgrades that results in a significant slowdown in foreign capital inflows from the second half of 2016. This environment sees the rand weakening to an average of R21/$ in 2017Q4, before recovering from early 2018....Get it here

The outlook for the domestic economy over the medium term is one of a somewhat improved (from the current very poor conditions), but still unsatisfactory performance. Real GDP growth is expected to increase to the 2.5% to 3% level during 2015 to 2020. ...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

In domestic news, consumer price inflation moderated by more than expected in July, while producer prices increased at a faster pace. The inflation numbers, together with the implications for monetary policy, are discussed in the domestic section. On the international front, comments made by US Federal Reserve (Fed) chair Janet Yellen suggest that a US interest rate hike before year-end is back on the cards. Additionally, we reflect on economic activity in the US and the Eurozone (EZ) as measured by the preliminary Purchasing Managers’ Index (PMI) readings for August....Get it here

On the domestic front, data released by Statistics South Africa (Stats SA) showed that the trade sector expanded during 2016Q2 despite monthly declines in both retail and wholesale sales in June. Together with the positive mining and manufacturing data for the second quarter, the better performance of the trade sector should boost Q2 GDP growth. For more detail, see the domestic section. In international news, the minutes from the US Federal Reserve’s (Fed) July meeting confirm the view that US interest rates could remain unchanged until at least December. This view was further supported by a subdued July inflation print. The Fed minutes, together with inflation prints from the US and the Eurozone, are discussed in the international section....Get it here

In the domestic section, we unpack mining and manufacturing output figures for June. The solid monthly growth figures suggest that the SA economy avoided a technical recession in the first half of 2016. The better-than-expected local data, as well as a weaker US dollar in general, helped lift the rand to fresh 2016 highs last week. On the international front, US retail sales came out weaker than expected. Coupled with benign inflation figures, this means that US interest rates could remain on hold for longer. In China, there may be further monetary easing as consumer inflation moderated and activity indicators deteriorated in July....Get it here

Domestically, the focus last week was on the outcome of the Municipal Elections. New vehicle sales data and capacity utilisation in the manufacturing sector are also discussed. On the international front, the most important release was the non-farm payroll data in the US. The figure was much stronger than anticipated which suggests an increased probability of the US Federal Reserve hiking the policy interest rate in 2016, possibly in September already. Across the Atlantic, monetary policy in the UK was eased more aggressively than expected. The monetary policy easing is despite a higher inflation outlook on the back of the weaker sterling. ...Get it here

There was a spate of economic news last week, both internationally and domestically. On the international front, the first estimates for Q2 GDP were released in a number of advanced economies, with mixed results. Growth in the UK rose above expectations, while in the US and Eurozone the figures disappointed. Meanwhile, domestic headlines were dominated by the unemployment figures for Q2 and trade data for June. The latter showed that SA’s trade surplus remained elevated in June, albeit that it narrowed compared to the record level reached in May. ...Get it here

Domestic economic news last week was dominated by the SA Reserve Bank (SARB) interest rate announcement on Thursday. As expected, the repurchase (repo) rate remained unchanged. The decision came after June consumer inflation (CPI) data was in line with expectations. On the international front, the latest economic forecast by the International Monetary Fund (IMF) suggests that headwinds facing the global economy are rising. This is particularly true of developments surrounding Brexit, with prospects for Britain downbeat. ...Get it here