Nedbank Weekly Economic Monitor

27 Jun.

Nedbank Weekly Economic Monitor: Review of 20 to 24 June and preview of 27 June to 1 July 2011.

• The rand was dragged down by risk aversion and softer precious metal prices.
• Consumer inflation rose more than expected to 4,6 % y-o-y in May from 4,2 % y-o-y in April, mainly as a result of higher food and fuel prices.
• The current account deficit widened in line with expectations to 3,1 % of gdp in the first quarter of this year from a revised 1,0 % in the fourth quarter of last year.
• US Gdp growth for the first quarter was revised modestly upwards to an annualised 1,9 % q-o-q from 1,8 % q-o-q.
• In the Eurozone, new orders of industrial goods increased in April, rising by 0,7 % m-o-m, following a 1,5 % m-o-m decline in the previous month.

Comment

Softer precious metal prices and risk aversion dragged the rand lower last week, with the local unit ending the week at R6,89, R9,72 and R10,99 against the US dollar, the euro and the British pound respectively, down from R6,73, R9,67 and R10,94 at the previous week’s close.

In the capital market, bonds were pressured by a weaker rand and the release of higher than expected inflation numbers in the middle of the week. However, they regained some ground later in the week, with the yields on the benchmark R157 2015 and the R186 2025 closing 7,42% and 8,53% on Friday, down from 7,55% and 8,60% a week earlier while the 3-, 5- and 10-year BESA actuaries fell to 7,02%, 7,69% and 8,32% from 7,10%, 7,78% and 8,40% respectively.

Money market rates remained mixed, with the 3-month JIBAR unchanged at 5,50%, the 6- month JIBAR falling slightly to 5,72% from 5,73%, while the 9- and 12-month JIBAR increased to 6,13% and 6,39% from 6,09% and 6,34%.

Local equities were generally steady at the end of the week, compared with the previous week’s close, mainly due to mixed performance in global markets. The FTSE-JSE all share index ended at 30 680,2, up by 0,04% from 30 669,3 a week earlier, with industrials and basic materials, both up by 0,2% to end at 31 850,8 and 28 679,8 respectively, while financials lost 0,5% to close at 21 018,9.

Consumer inflation rose well ahead of market expectations (4,3 % y-o-y), increasing to 4,6% y-o-y in May from 4,2% y-o-y in April, mainly as a result of higher food and fuel prices. Food inflation continued to rise, increasing to 6,3%y-o-y from 4,8% in April. Over the month, prices rose by 1,7%, mainly as a result of higher prices of breads and cereals, oils and fats as well as vegetables. Prices of durable goods fell by 0,1% m-o-m, due to lower prices for vehicles and telecommunication equipment. The transport category rose by 0,7% m-o-m, mainly due to a 2,9% increase in the price of petrol as well as a 2,9% m-o-m increase in other running costs. Vehicle prices were unchanged over the month. Annual inflation in transport rose modestly to 3,8%, largely driven by petrol, which rose by 17,7% y-o-y. Services inflation remained unchanged at 4,7% in May. Administered prices are the main driver of inflation, increasing by 11,3% y-o-y. Excluding administered prices, inflation remains muted at 3,5%, up modestly from 3% in the previous month. …

See the full Economic Monitor