Nedbank: Trade data

01 Sep.

Nedbank Economic Commentary: Trade data July 2011.

The trade account recorded a large deficit in July following a big surplus in the previous month.

• The R3,9 billion deficit in July was a result of a decline in exports, which fell by 6,7% m-om against imports, which rose by 8,5% m-o-m.
• The decline in exports over the month was mainly attributed to drops in the ‘precious metals and stones’ and ‘base metals’ categories, which fell by 13,6% and 5,6% respectively.
• Imports were boosted by ‘vehicles and equipment’ and ‘electrical equipment’, which rose by 35,5% m-o-m and 9,7% respectively as well as mineral products, which rose by 8,7% over the month.
• Trade data will remain volatile, with exports likely to be pressured by weakening global economic conditions, while the growth in imports will be contained by subdued local economic activity.
• The data have little implication for monetary policy in the short term given their volatile nature and the MPC’s focus on inflation and growth. Although the chances of rate cut have increased, especially if the world and local economies were to weaken even further, we still expect interest rates to remain on hold until May 2012.

Comment

Imports rose by 8,5% m-o-m in July, mainly reflecting the 35,5% and 9,7% rises in imports of ‘vehicles and equipment’ and ‘electrical equipment’ as well as mineral products, which increased by 8,7% m-o-m. On an annual basis, imports in those categories also remained firm, rising by 37,6%, 16,3% and 9% respectively.

In contrast, exports fell by 6,7% m-o-m in July following two months of relatively strong growth. The decline was attributed mainly to the ‘precious metals and stones’ and ‘base metals’ categories, which fell by 13,6% (up 4,4% y-o-y) and 5,6% (down 9,8% y-o-y) respectively over the month. Exports of electrical equipment were also weak on both monthon- month and annual basis. However, ‘mineral products’, which account for about 23% of total exports, increased by 0,9% m-o-m and 9,2% y-o-y.

Over the first seven months of this year the cumulative trade deficit amounted to R6,4 billion, slightly better than the deficit of R7,5 billion during the same period in 2010. …

See the full Commentary