Nedbank Weekly Economic Monitor

01 Aug.

Nedbank Weekly Economic Monitor: Review of 25 to 29 July and preview of 1 to 5 August 2011.

• The rand was supported by the gold price, which reached a new record level last week.
• Annual growth in private sector credit extension remained subdued in June at 5,2% – unchanged from the previous month.
• Producer inflation rose more than expected in June, increasing to 7,4% y-o-y from 6,9% y-o-y in May.
• US gdp growth for the second quarter was lower than expected, growing by an annualised 1,3% q-o-q, compared with market expectations of 1,6%.
• Eurozone, consumer inflation remained unchanged at 2,7% y-o-y in July. 
• In the UK, gdp expanded by a modest 0,2% q-o-q in the second quarter, following growth of 0,5% q-o-q in the first quarter.

Domestic

The rand closed the week firmer, helped by the higher gold price. The gold price reached a new record level on Friday following news that US second quarter growth numbers were weaker than expected, which increased risk perceptions and boosted safe-haven demand for gold. The local unit ended at R6,69, R9,47 and R10,98 against the US dollar, the euro and the British pound respectively, up from R6,77, R9,72 and R11,03 at the end of the previous week.

Bonds were mixed, with yields on the benchmark R157 2015 falling to 7,33% from 7,37% while those on the R186 2025 increased to 8,49% from 8,47%. The 3- and 5-year BESA actuaries declined slightly to 6,98% and 7,63% respectively from 6,99% and 7,65%, while the 10-year BESA actuaries were unchanged at the previous week’s close of 8,25%.

Money market rates were generally steady, with the 3- and 12-month JIBAR unchanged at 5,50% and 6,20% respectively, 6-month JIBAR to 5,78% from 5,79%, and 9-month JIBAR up slightly to 6,01% from 6,00%.

Local equities were dragged down by weaker global markets on worries about the US economy as well as weak resource stocks, which were hurt by worries of a looming strike in the South African mining sector. The FTSE-JSE all share index lost 2,5% over the week, ending at 31 208,0 on Friday. Basic materials were down by 4,4% to close at 28 789,4, with the gold index falling by 5,4% and the platinum index losing 3,3%. Industrials and financials were also down, falling by 1,1% and 1,6% respectively to end at 33 024,8 and 21 203,7.

Growth in money supply eased slightly to 6% y-o-y in June from 6,1% y-o-y in May. Over the month, money supply rose by 0,6% on a seasonally adjusted basis but was flat in unadjusted terms. A R22,1 billion fall in net claims on the government sector, which was only partly offset by increases in net foreign assets and claims on the private sector. Annual growth in private sector credit extension remained subdued in June at 5,2% – unchanged from the previous month. Advances to households remained the main driver of credit growth, rising by 7% y-o-y, with modest increases in mortgage growth as well as instalment and leasing finance. Corporate credit demand remained subdued at 3,7% y-o-y, unchanged from the previous month. …

See the full monitor at Weekly Economic Monitor