Nedbank Weekly Economic Monitor

20 Jun.

Nedbank Weekly Economic Monitor: Review of 13 to 17 June and preview of 20 to 24 June 2011.

• The rand ended stronger on Friday, helped by a firmer euro.
• Retail sales for April come out more than expected, rising by 9,8 % y-o-y, mainly boosted by the large number of public holidays which provided additional time to spend.
• US consumer inflation rose to 3,6 % in May, up from 3,2 % in April, much higher than market expectations of an increase to 3,3 %.
• In the UK, Inflation was unchanged at 4,5 % in May.
• Eurozone industrial production rose by 0,2 % m-o-m, against market expectations of a 0,2 % decline.

Comment

The rand closed the week firmer, mainly helped by a firmer euro which was pushed up by news that European leaders may implement a second rescue package for Greece. The local unit ended at R6,73, R9,67 and R10,94 against the US dollar, the euro and the British pound respectively, up from R6,80, R9,76 and R11,03 at the previous week’s close.

Bonds however remained weak, with the yields on the benchmark R157 2015 and the R186 2025 rising to 7,55% and 8,60% on Friday from 7,47% and 8,50% at the previous week’s close, while the 3-, 5- and 10-year BESA actuaries increased to 7,10%, 7,78% and 8,40% respectively from 7,03%, 7,70% and 8,29%.

Money market rates were mixed, with the 3-month JIBAR steady at 5,50%, the 6-month JIBAR closed at 5,73% from 5,74%, while the 9- and 12-month JIBAR rose to 6,09% and 6,34% from 6,05% and 6,27%.

Local equities were dragged down by weaker global markets and softer commodity prices.

The FTSE-JSE all share index lost 1,6% over the week, ending at 30 669,3 on Friday, with industrials, financials and basic materials down by 2,2%, 0,7% and 1,4% respectively to close at 31 779,6, 21 122,7 and 28 632,1.

Retail sales rose by 9,8% y-o-y in April following a 5,3% increase in the previous month, well above the consensus forecast of 5,1%. Over the month, sales were probably boosted by the large number of public holidays in April, which provided additional time to spend. Sales rose by seasonally adjusted 2,3% m-o-m, the strongest monthly increase since June 2008. On an annual basis, all seven major categories of retail sales recorded growth. The strongest contributions came from ‘textiles, clothing, footwear and leather goods’, ‘pharmaceutical and medical goods, cosmetics and toiletries’ and ‘household furniture, appliances and equipment’, which rose by 16,9% y-o-y, 13,7%, and 13,1% respectively. Sales in the ‘general dealers’ category, which accounts for 39% of total sales remained firm at 7,3% following a 7,1% rise in March. The ‘food, beverages and tobacco in specialised stores’ category, which experienced three successive months of declines earlier also rebounded strongly in April, with sales rising by 6,6% y-o-y. …

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