Nedbank Weekly Economic Monitor

18 Jul.

Nedbank Weekly Economic Monitor: Review of 11 to 15 July and preview of 18 to 22 July 2011.

• The rand was pressured by low risk appetite on continued worries about the European debt crisis.
• Annual growth in manufacturing production remained weak at 0,6 % in May after falling sharply to 0,4 % in April, while growth in mining production eased to 9,6 % y-o-y from 12,0 %.
• US data confirmed that the economic recovery continues to lose momentum, prompting Bernanke to confirm that the Fed is ready to act should the need arise.
• China economic growth fell in the second quarter, although moderately, suggesting that the Chinese economy could be heading for a soft landing.

Comment

The rand ended the week softer on low risk appetite, amid continued worries about the European debt crisis. The unit closed at three-week low of R6,88 against the US dollar on Friday, down from R6,72 a week earlier.

The rand fell to R9,73 and R11,11 against the euro and the British pound respectively from R9,56 and R10,76. Bonds weakened in line with the rand, with yields on the benchmark R157 2015 and the R186 2025 rising to 7,48% and 8,60% from 7,40% and 8,46%, while yields on the 3-, 5- and 10-year BESA actuaries increased to 7,06%, 7,73% and 8,40% respectively from 6,99%, 7,65% and 8,28%.

Money market rates remained mixed, with the 3-month JIBAR increasing slightly to 5,52% from 5,50%, while the 6-, 9- and 12-month JIBAR dropped to 5,79%, 5,99% and 6,24% respectively from 5,81%, 6,07% and 6,33%.

Local equities were slightly firmer despite weaker global markets, mainly boosted by industrial stocks. The FTSE-JSE all share index gained 0,9% over the week, ending at 32 288,4 on Friday, with industrials up by 1,8% to close at 33 947,5. Financials and basic materials also increased marginally, both gaining 0,1% to end at 21 785,2 and 29 997,4 respectively.

Growth in manufacturing production remained weak, rising by only 0,6% y-o-y in May after falling sharply to 0,4% in April on the back of the large number of public holidays and against the consensus forecast of a 2,4% rise. Over the month, production contracted in 4 of the 10 major manufacturing divisions on a seasonally adjusted basis. …

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