19 Sep.
Absa: SA Morning Sheet.
This is a daily economic comment …
The sheets can be downloaded daily from Absa Economic Research
An extract fro today’s sheet is provided as an example:
It is yet another important week on the South African data calendar with the release of consumer price inflation and retail sales figures on Wednesday while the SARB MPC will deliver its second to last interest rate decision for the year on Thursday. We forecast headline CPI to rise by 5.6% y/y in August (5.3% y/y in July). The usual exogenous culprits – food and transport prices – are forecasted to make up half of the expected 0.4% m/m increase in inflation.
Price surveys in electricity and water (not all municipalities apply electricity tariff increases in July) leave the housing component adding a further 0.1pp to monthly inflation. We expect only a modest print of 1.8% y/y for July retail sales (2.2% prior). Though most of the moderation in growth emanates from the high base related to last year’s Soccer World Cup increase in spend, we expect much of the expected m/m uptick in sales to come from clothing and footwear retailers given strong sales growth reported by some local retail giants.
Finally, the big event of the week will be the SA Reserve Bank’s MPC decision on Thursday where we are in line with consensus and expect it to keep the repo rate unchanged at 5.5%. At the time of the July MPC statement global uncertainty had already filtered into the SARB’s thinking. Here, the MPC statement moved from a ‘vigilant’ stance to an inflation outlook that was deemed as ‘delicately balanced’. This, in our view, proves how focused the MPC is on the downside risks to the global recovery.
Markets: No doubt this week’s main event will be the MPC on Thursday. As difficult as it has been to trying to understand the last week as an analyst, spare a thought for policymakers who find themselves in the middle of these events. As with our own macro forecasts, we expect the SARB to signal a somewhat weaker economic growth baseline in their communication, along with further concerns on market and economic spillover from the deteriorating environment in Europe. Just how far the baseline deteriorates, and just how much of that risky tail is pulled into the central scenario is impossible to say, but the answer to both will be critical in terms of building a policy rates outlook. If only the inflation outlook were to also moderate then the signalling might be somewhat easier, but with ZAR weakness now looking a little more ingrained there appears little room for an improved inflation path. …
The sheets can be downloaded daily from Absa Economic Research
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