Nedbank Weekly Economic Monitor

09 Aug.

Nedbank Weekly Economic Monitor: Review of 1 to 5 and preview of 8 to 12 August 2011.

• Both the rand and equity markets fell last week on global risk aversion.
• Growth in vehicle sales moderated further in July.
• The international liquidity position rose again in July on the higher international gold price and more Reserve Bank activity in the market.
• Internationally, markets were rattled by heightened risk aversion on spreading European debt woes.
• Major rating agencies downgraded the US’s sovereign debt rating from AAA to AA+, the first time in over 70 years that the US has been downgraded.
• US non-farm payrolls rose faster than market consensus in July, with the unemployment rate falling slightly in that month.
• Both the ECB and BoE left interest rates unchanged last week.

Domestic

The rand weakened last week on the back of heightened global risk aversion; this despite the gold price reaching a new all-time high. The local unit fell to R6,92 against the US dollar on Friday from R6,69 in the previous week, while it was down to R9,88 and R11,34 from R9,47 and R10,98 against the euro and the British pound, respectively.

Bond yields fell; the yield on the benchmark R157 2015 was down to 7,15% from 7,33%, while that on the R186 2025 fell to 8,21% from 8,49%. Yields on the 3- and 5-year BESA actuaries declined to 6,79% and 6,40% from 6,98% and 7,63% respectively, while the 10- year BESA actuaries eased to 8,02% from 8,25%.

Money market rates were little changed, with the 3-month JIBAR at 5,52% from 5,50%, while the 6-month JIBAR was unchanged at 5,78%. The 9-month JIBAR was slightly down at 5,97% from 6,00%, while the 12-month JIBAR ended at 6,11% from 6,20%.

Local equities fell sharply last week, in line with the drop in global markets. The FTSE-JSE all share index shed 6,3% to close at 29 256,8 on Friday, its lowest level since September 2010. Basic materials bore the brunt of the selloff, plunging by 7,7% to 26 580,55, while industrials and financials fell by 5,9% and 4,8% to 31 081,6 and 20 194,7, respectively.

Growth in vehicle sales moderated to 10,5% y-o-y in July from 12,5% in June, with total sales up by only 1,8% m-o-m following two months of relatively strong increases. Sales of passenger and commercial vehicles rose by 1,9% and 1,7% in the month. Sales of commercial vehicles were mainly dragged down by the heavy commercial category, which fell by 12,9% m-o-m. On a y-o-y basis passenger car sales rose by 9,7%, their weakest growth rate since December 2009, from 17,3% in June, while sales of commercial vehicles were firmer at 12,7%. All the sub-categories of commercial vehicles recorded annual growth of more than 10% in July after mixed performance in earlier months. Vehicle exports fell by 0,6% m-o-m in July following two months of strong growth, depressed by the passenger cars, which fell by 15,5%. However, exports of commercial vehicles rose by 43,7% m-o-m. On an annual basis, total exports increased by 8,1%, with the growth rate falling from 23,5% in June. Again, the deterioration was due to the passenger car category, which fell by 13,2% y-o-y following a 14,2% y-o-y rise in June, while commercial vehicles jumped by 89,3% y-o-y, with all the sub categories recording strong annual growth. …

See the full monitor at Weekly Economic Monitor