After rising marginally to 42 in 2015Q4, the FNB/BER Civil Confidence Index fell by 14 points in 2016Q1 to 28. This is the lowest level for the index since 2011Q4. The results from the civil contractor survey suggests that construction activity slowed noticeably during the quarter along with a marked uptick in tendering price competition.

The seasonally adjusted Barclays Purchasing Managers’ Index (PMI) continued its recent upward move and reached 54.9 index points in April. The PMI rose from 50.5 in March and is now more than 10 points above the level recorded just three months ago. The new sales orders index rose for a third straight month and the improvement in demand filtered through to higher output. The business activity index increased above the neutral 50-point mark after signalling a slowdown for eight straight months. Some respondents noted that import substitution led to an improvement in domestic demand, while exports also rose.

The RMB/BER BCI was unchanged at 36 in the first quarter of 2016. While sentiment recovered in four of the five sectors during the quarter, improvements were small. Also, confidence among manufacturers collapsed to levels last seen during the 2009 recession. The poor, and in some cases deteriorating underlying activity indicators, are worrying signs. This might well point to further weakness in GDP growth ahead.

After recovering in 2015Q3, the FNB/BER Consumer Confidence Index (CCI) collapsed back to close to multi-year lows in 2015Q4. All three sub-indices lost some ground as a myriad of adverse economic forces continue to hammer the consumer. The latest CCI reading correlates with the 2015Q4 EY/BER Retail Survey results, which signalled a significant slowdown and generally disappointing retail sales growth in the run-up to Christmas 2015.

Economic indicators

Key indicators

Tue May 03 2016 12:33:07

Rand-Dollar

14.4243

1.14%

Rand-Pound

21.1831

1.23%

Rand-Euro

16.7065

1.60%

Gold

1297.71

0.46%

Platinum

1081.50

0.51%

Brent Crude EOD

46.08

0.00%

R186

8.98

2bps

R207

8.40

1bps

Share indices (Previous day's close)

Last updated: Tue May 3 2016 08:13:15

JSE all-share

52957

0.00 %

JSE Top 40

46471

0.00 %

US S&P 500

2081

0.78 %

German Dax

10123

0.84 %

Japan Nikkei

16147

-3.11 %

Please note


Recent releases

Last week saw the release of global GDP data for the first quarter. The figures continued to paint a mixed picture of economic fortunes. While growth in the Eurozone accelerated, in the UK and the US growth moderated. In contrast, domestic data was broadly upbeat. Not only did SA record a trade surplus in March (which bodes well for the current account deficit), but the Barclays Purchasing Managers’ Index (PMI) rose to 54.5 points. The PMI data signals a more sustained improvement in the manufacturing sector....Get it here

The seasonally adjusted Barclays Purchasing Managers’ Index (PMI) continued its recent upward move and reached 54.9 index points in April. The PMI rose from 50.5 in March and is now more than 10 points above the level recorded just three months ago. The new sales orders index rose for a third straight month and the improvement in demand filtered through to higher output. The business activity index increased above the neutral 50-point mark after signalling a slowdown for eight straight months. Some respondents noted that import substitution led to an improvement in domestic demand, while exports also rose....Get it here

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

Last week was relatively quiet on the domestic front, with the March consumer price index (CPI) being the only notable data release. CPI inflation slowed in March, but remained above the 6% target. A reacceleration in price pressures is expected during the remainder of the year – more in the domestic section. In the international section we focus on the preliminary Purchasing Managers’ Index (PMI) figures from Europe and the US that give a first indication of economic growth in 2016Q2. Signs that the US economy could be slowing may mean that the US Federal Reserve (Fed) will keep the policy interest rate on hold for longer. This week’s Federal Open Market Committee (FOMC) meeting, as well as the 2016Q1 US GDP release, are therefore keenly awaited by markets. ...Get it here

Countercyclical capital buffers are intended to protect the banking sector and the broader economy from episodes of excessive credit growth, which have been associated with financial sector procyclicality and the build-up of systemic risk. The Basel Committee on Banking Supervision has suggested in its guidance to national authorities that the credit-to-GDP gap be used as a guide to taking decisions regarding the countercyclical capital buffer. This paper provides a South African perspective on the implementation of this guidance. Credit-to-GDP gaps are estimated by applying Hodrick-Prescott filters to real-time South African data, specifically constructed for this study, and these gaps are mapped to countercyclical buffers. The properties of these estimates are compared, and the calibration of the lower and upper thresholds of the buffer in the South African case is also investigated. The study confirms that the mechanical application of the credit-to-GDP guide is not advisable, and raises a number of issues that policy-makers will have to consider when implementing the countercyclical buffer guidance. The analysis also suggests that the calibration of the lower and upper thresholds for the gaps may need to be adjusted in the South African case if the Basel Committee’s expectation that the buffers be employed only every 10-20 years is to be met....Get it here

Extant studies on fundamental and technical analysis frequently focus on analysing each of the valuation techniques independently. This study constructs a hybrid of the two to determine whether this model can have a superior explanatory power to models based on each of the valuation techniques in isolation. The results confirm the complementarity of fundamental and technical analysis with the hybrid model delivering superior performance. Further, fundamental variables that play a significant role in explaining stock price movements of JSE listed stocks are noted to be the book value, cash flow, earnings and dividends per share....Get it here

This paper applies the Nelson Siegel (NS) parameterisation framework adopted by Diebold and Li (2006) to model the 10-year South African Government yield curve over the period February 2005 to October 2014, producing R-squared values exceeding 80% in 77% of the 117 months falling within the sample period. It goes on to consider the addition of a further “Svensson curvature parameter” over and above the NS Level, Slope, and Curvature factors but concludes that the inclusion of an additional parameter is not statistically justified. These NS parameter estimates, along with a residual rand exchange rate factor, are then used to estimate models of the key Johannesburg Stock exchange indices in return form. The paper is able to show that particular sectors are consistently related to particular NS parameter estimates over the period of analysis and, for example, is able to conclude that share return weakness in the case of “Rand Play” sectors such as Financials, Listed Property and Retail (which occur during periods of rand weakness) takes place only when the bond market is simultaneously selling off. The analysis points to a model of broader-based risk-off market sentiment towards South African assets (currency, equities, and bonds) rather than the often-applied one-dimensional, standalone currency effect....Get it here

This paper examines the effects of financial reforms on the operating and financial performance of firms listed on the Johannesburg Stock Exchange (JSE). Using panel data estimation models, the results show; firstly, that the combined effect of the stock market liberalisation waves that commenced with the lifting of international sanctions is associated with a statistically significant increase in average shareholder returns. Secondly, the stock market reforms that commenced with the introduction of the electronic trading system are associated with improved financial performance. Thirdly, the first and second waves of stock market liberalisation cause large firms to increase their financial performance. However this trend reverses after the third wave of stock market liberalisation. Fourthly, the liberalisation of the capital account is associated with a significant increase in the probability for firms to become highly levered, thus increasing the possibility of these firms to become financially constrained. Lastly, firm specific characteristics play a significant role in explaining the variability in the probability for firms to become financially constrained (unconstrained)....Get it here

This paper provides an analysis of the theoretical and empirical foundations of public debt dynamics in Zimbabwe. The analysis was undertaken by applying the debt dynamics equation that enables estimating the required primary balance, building on the government inter-temporal budget constraint to infer the factors that influence public debt, as well as to ascertain specific policy issues required to ensure a sustainable public debt structure. The results show that debt dynamics in Zimbabwe are largely composed of huge stock flow adjustments to finance social and political related expenditures. Results also indicate that the output gap had a significant influence on public debt dynamics in Zimbabwe. As such, the results underscore the need for prudent debt management to guard against unexpected changes in public debt, which are not explained by fundamentals. The major policy implication from the study is the need to minimize the interest rate growth differential and to implement growth enhancing fiscal policies to ensure a sustainable long term public debt position....Get it here

Throughout the past 3 decades, the random walk model served as exchange rate forecasting benchmark to verify that a model is able to outperform a random process. However, its application as forecasting benchmark is contradictory. Rather than serving as a benchmark that explains exchange rate behaviour, it serves as a benchmark of what we do not understand in exchange rate forecasting – the random component. In order to accommodate for the observed mean reverting and non-linear patterns in exchange rate information, this study considers various univariate models to serve as linear or non-linear benchmarks of exchange rate forecasting. The results of forecasting performance indicate that the random walk model is an insufficient benchmark to explain exchange rate movements for non-static models. As linear alternative, an autoregressive model performed best to explain the mean reverting patterns in exchange rate information for quarterly, monthly and weekly forecasts of the exchange rate. As non-linear alternative, a Kernel regression was best able to explain volatile exchange rate movements associated with daily forecasts of the exchange rate....Get it here

Forecast publications

After a tumultuous start to 2016, global growth appears to have stabilised. However, developed countries continue to struggle to stimulate domestic demand, while emerging markets appear to be at the mercy of a slowing Chinese economy. This is also true of South Africa where early indications are that GDP growth is likely to come under significant pressure in 2016....Get it here

After a tumultuous start to 2016, global growth appears to have stabilised. However, developed countries continue to struggle to stimulate domestic demand, while emerging markets appear to be at the mercy of a slowing Chinese economy. This is also true of South Africa where early indications are that GDP growth is likely to come under significant pressure in 2016....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

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

The outlook for the South African economy over the medium term is not very inspiring, despite some improvement from 2017 onwards. Real economic growth is only projected to breach the 3% level by 2020, averaging 2.6% for the 6 years 2015 – 2020. This follows primarily from the continued restraining impact of electricity supply, low business confidence and consequently private sector fixed investment and (deficit and debt) constrained government expenditure levels. Under these conditions employment growth is likely to be quite poor, implying pedestrian growth in consumer spending....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

Starting January 2016, BER Snapshot is no longer freely available for non-BER clients, but is available to purchase for R49 per monthly issue....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

Last week saw the release of global GDP data for the first quarter. The figures continued to paint a mixed picture of economic fortunes. While growth in the Eurozone accelerated, in the UK and the US growth moderated. In contrast, domestic data was broadly upbeat. Not only did SA record a trade surplus in March (which bodes well for the current account deficit), but the Barclays Purchasing Managers’ Index (PMI) rose to 54.5 points. The PMI data signals a more sustained improvement in the manufacturing sector....Get it here

Last week was relatively quiet on the domestic front, with the March consumer price index (CPI) being the only notable data release. CPI inflation slowed in March, but remained above the 6% target. A reacceleration in price pressures is expected during the remainder of the year – more in the domestic section. In the international section we focus on the preliminary Purchasing Managers’ Index (PMI) figures from Europe and the US that give a first indication of economic growth in 2016Q2. Signs that the US economy could be slowing may mean that the US Federal Reserve (Fed) will keep the policy interest rate on hold for longer. This week’s Federal Open Market Committee (FOMC) meeting, as well as the 2016Q1 US GDP release, are therefore keenly awaited by markets. ...Get it here

Data releases last week showed that slowing Chinese growth continues to weigh on the domestic economy. The latest SA mining production figures confirm that the sector continues to struggle in the face of waning demand and low commodity prices. In contrast, retail and wholesale sales surprised on the upside, suggesting that there is still some life in the trade sector. In international news, data released by China’s National Bureau of Statistics showed that the country’s GDP growth moderated to its lowest level since the financial crisis during 2016Q1. However, other data releases suggest that the economy has stabilised after a rather tumultuous start to 2016. In the US, muted growth in retail sales and subdued inflation confirm that further monetary tightening might be postponed. ...Get it here

Last week, the oil price jumped suddenly, minutes released by the two major central banks had a dovish undertone and domestic data was on the positive side. Locally, relative to 12 months before, more tourists visited South Africa at the start of the year. In all likelihood, this was due to less stringent visa regulations and a weaker currency. Manufacturing output accelerated in February, while the country’s foreign reserves improved marginally during March. On the international scene, both the Federal Reserve (Fed) and the European Central Bank (ECB) released the minutes of their most recent monetary policy meetings. As expected, the tone of both was on the dovish side, fuelling a rebound of interest in emerging market assets, among others South African dollar bonds. Meanwhile, the oil price jumped suddenly on Friday as markets were caught off-guard by the steep fall in US crude oil stockpiles....Get it here

Last week, Purchasing Managers’ Indices (PMIs), which provide early signals on economic growth trends, were published for SA and key international economies. Domestically, the Barclays PMI edged up above the neutral 50-point level for the first time in eight months. In stark contrast, new vehicle sales slumped in the same month. Besides the PMI and vehicle sales data, the latest trade balance and producer inflation data are also discussed. Internationally, a statement by the Federal Reserve (Fed) chair Janet Yellen emphasised their concern about the health of the US and global economies. However, the latest non-farm payrolls and ISM data for the US were better than expected. In China and the Eurozone (EZ), PMI data also indicated an improvement in the manufacturing sector. Financial markets reacted to the dovish comments by Yellen. The US dollar weakened slightly, lending some additional momentum to the recovery of the rand, which traded below R15/$ for the first time in four months. ...Get it here

While the domestic news flow was mainly centred on political developments, the most important economic event was yesterday’s Monetary Policy Committee (MPC) meeting. The MPC decided to raise the repo rate by 25 basis points (bps). The decision was a close call and, in our view, the MPC failed to provide sufficient justification for the rate hike – more on this in the domestic section. Internationally, there also was a monetary focus with the US Federal Reserve (Fed) keeping their policy rate unchanged. However, the Fed was markedly more dovish than expected. This is in part due to recent US data pointing to a slight loss of growth momentum. ...Get it here