Reports

PMI Improves for the Second Straight Month

In September 2017, the ABSA Purchasing Managers’ Index (PMI) increased by 0.9 index points from the 44 index points recorded in August 2017, leaving it at 44.9 index points. This means that PMI improved for two consecutive months (since August 2017), but continued to stay in the contraction territory for four straight months (Since June 2017)…

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CPI Higher than Expectations

In the last month of the third quarter of 2017, consumer inflation rose to 5.1% y/y, the same growth rate recorded in the last month of the second quarter of 2017. Today’s results follow growth rates of 4.6% y/y and 4.8% y/y registered in July and August, respectively…

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Retail Sales Rise in August

The latest data released by Statistics South Africa shows that South Africa’s retail sales growth beat market expectation. In August 2017, sales grew by 5.5% y/y, versus the 2.5% y/y market expectation growth rate (IRESS expectation). Today’s results follow 1.6% y/y recorded in July and 3.1% y/y recorded in June…

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Manufacturing Output Increases in August

After declining for four straight months since April 2017, manufacturing output increased by an unexpected 1.5% y/y in August 2017. Manufacturing output was anticipated to decline further in August 2017, however at a slower pace than July’s output growth (-0.5% y/y as per IRESS Consensus from the -1.1% y/y recorded in July 2017)…

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The South African Economy Ends its Technical Recession

The South African seasonally adjusted and annualized quarterly GDP grew by 2.5% during the second quarter of 2017. This is a welcome outcome, largely expected by the market (as high frequency data was pointing to a positive growth outcome). This means South Africa is out of the technical recession in which it had entered following two consecutive quarters of negative GDP growth (fourth quarter 2016: -0.3% q/q, first quarter 2017: -0.6%q/q (upwardly adjusted from -0.7% q/q)).

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The 2017 ANC Policy Conference: Bereft of Content, Yet Raising Uncertainties

The much-awaited African National Congress (ANC) mid-term Policy Conference was wrapped up yesterday. As anticipated, the Conference was far more about the critical succession planning than any serious focus on any ideological or socioeconomic policy issues. Commentators had long argued that no meaningful policy debate could take place in a milieu where the Party is split between the Zuma slate and the Reformers. Increasing evidence is coming to light that the Zuma camp is corrupt, captured, and engaged in a systematic erosion of the ANC’s and the State’s governance principles and institutions. The Reformers, on the other hand, are committed to rescue the Party and its legacy at all cost.

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Economic Recovery was Indeed Derailed and Confidence Remains Low

Summary and Assumptions

  • South Africa’s Growth: Economic Growth was more than disappointing during the first quarter of 2017 as GDP contracted by 0.7% following a prior contraction of 0.3% in the final quarter of 2016. This means South Africa entered into a technical recession during the first quarter of 2017, the first recession since the 2008/09 financial crisis…
  • The Manufacturing Sector: Manufacturing declined by 3.7%, contributing -0.5 percentage points to the first quarter GDP performance. Although PMI stayed above the 50-neutral mark during the 2017 first quarter months (after staying in the contraction territory for two consecutive quarters at the end of 2016), it plunged to 44.7 points in the first month of the second quarter, the worst performance since the beginning of 2016…
  • Business Confidence: The business confidence index, which collapsed by 11 points from 40 index points during the first quarter of 2017 to 29 index points during the second quarter, continues to be weighed by the tumulus political climate, as well as consistently weak business activity.
  • The Consumer: Final household consumption expenditure contracted during the first quarter of 2017. Household disposable income has been adversely affected by the poorly performing economy and also contracted during the period…
  • Exchange Rate, Inflation & Interest Rates: The Reserve Bank has maintained a repo rate of 7% since early 2016. South Africa’s inflation finally reverted back into the Reserve Bank’s target range of 3-6% in April 2017 when it decelerated to 5.3% y/y from 6.1% in March 2017… The Fiscus: The muted growth environment is exerting pressure on South Africa’s fiscal stance. We expect the country’s GDP growth to fall short of the 1.3% that was forecasted by the National Treasury at the beginning of 2017
  • Current Account: The deficit on the South African current account balance widened from 1.7% as a percentage of GDP in the final quarter of 2016 to 2.1% of GDP in the first quarter of 2017.

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