Nedbank: Trade data

01 Jul.

Nedbank Economic Commentary: Trade data May 2011.

The trade deficit narrowed in line with expectations in May

• In line with market expectations, the trade deficit narrowed to R1,0 billion in May from R2,4 billion in the previous month as exports (up by 9% m-o-m ) grew faster than imports (up 6% m-o-m).
• Over the month, 20 out of the 22 major categories of imports rebounded following sharp declines in April due to the large number of public holidays. The strongest increase in imports was recorded in the ‘fats and oils’ category, followed by base metals, electrical equipment, and ‘vehicles and parts’. In contrast, imports of mineral products fell sharply over the month, down by 12%.
• Exports were mainly driven by the footwear category, which rose by 53,9% m-o-m. Exports of precious or semi-precious stones as well as base metals rose by 14,3% and 15,2% m-o-m respectively. Exports of mineral products also fell over the month, dropping by 2,6% m-o-m, but rose by 30,1% y-o-y.
• Although exports will hold up relatively well throughout 2011, the rate of growth is likely to slow in the second half of the year as global growth eases and commodity prices moderate. Imports will be supported by firmer consumer demand and a gradual recovery in fixed capital formation.
• Trade numbers are volatile and have little implication for monetary policy in the short term. The MPC is likely to remain focused on the pace of the economic recovery and the inflation outlook. With consumer demand relatively subdued and only modest credit growth, the risk of second-round inflation accelerating seems modest. As a result, we expect the first hike in interest rates to come only in early 2012.

Comment

After being distorted by the large number of public holidays in April, trade activity rebounded in May. Exports grew faster than imports, which resulted in the reduction of the trade deficit. Over the month, exports rose by 9%, mainly driven by ‘precious or semi-precious stones and metals’ as well as base metals, which increased by 14,3% m-o-m and 15,2% respectively. In contrast, exports of mineral products fell by 2,6% m-o-m, but rose by 30,1% on an annual basis.

Imports rose by 6% over the month, with 20 out of the 22 major categories recording growth. The strongest increase in imports was recorded in the ‘fats and oils’ category, which rose by 133,3% m-o-m. Imports of base metals also came out strongly at 35,4% m-o-m (up 42,7% yo- y), while imports of electrical equipment as well as vehicles and other transport equipment increased by 6,6% m-o-m (15,3% y-o-y) and 3,8% m-o-m (down 3,8% y-o-y) respectively.

Over the five month period to May, the cumulative trade deficit amounted to R8,5 billion, down from R13,5 billion recorded in the same period last year. ….

See the full Commentary