Nedbank Weekly Economic Monitor

19 Sep.

Nedbank Weekly Economic Monitor: Review of 12 to 16 September and preview of 19 to 23 September 2011.

• Persistent global uncertainty kept the rand under pressure last week.
• Gross domestic expenditure slowed sharply in the second quarter, dragged down by weak consumer and government spending.
• The current account deficit widened marginally in the second quarter.
• The FNB/BER consumer confidence index plunged in the third quarter.
• Global markets rose firmly last week despite rising concerns about Greece.
• US retail sales were flat, consumer sentiment rebounded slightly, industrial production rose and consumer inflation rose further
• Job losses were recorded in the UK for the first time this year and Eurozone inflation remained elevated.

Domestic

The rand continued to be driven by developments in international markets. The local unit fell to its weakest level in over a year against the US dollar last week on continued concerns about European debt crisis. It closed at R7,45 against the US dollar on Friday, down sharply from R7,28 at the previous week’s close and fell to R10,22 and R11,80 against the euro and the British pound from R9,93 and R11,55 respectively.

Bonds also remained under pressure in line with the rand. The yields on the benchmark R157 2015 and R186 2025 ended at 6,77% and 8,19%, rising from 6,47% and 7,90%, while the 3-, 5- and 10-year BESA actuaries increased to 6,49%, 7,19% and 8,01% respectively from 6,19%, 6,85% and 7,72%.

In the money market, the 3-month JIBAR was unchanged 5,5%, while the 3-, 6-, 9- and 12- month JIBAR rallied to 5,64%, 5,73% and 5,78% after dropping to 5,60%, 5,66% and 5,70% respectively last week.

Local equities close higher in line with firmer international markets. The FTSE-JSE all share index gained 2% over the week, ending at 31 051,4 on Friday, with basic materials, industrials and financials up by 2,5%, 1,5% and 1,2% respectively to close at 28 083,3, 32 984,9 and 21 273,6.

The South African Reserve Bank’s Quarterly Bulletin showed that growth in gross domestic expenditure slowed to a seasonally adjusted and annualised 1,3% in the second quarter from 7,9% in the first quarter, dragged down by softer household demand as well as a drop in government spending. Growth in household expenditure eased to a seasonally adjusted and annualised 3,8% q-o-q from 5,2% in the first quarter, probably reflecting rising cost pressures and concerns about growth and job security. Households also remained cautious about taking on more debt, with the household debt to disposable income ratio falling to 75,9 over the quarter, its lowest level since the last quarter of 2006, from 76,8 in the first quarter of this year. Spending by general government fell by 0,1% q-o-q following two quarters of firm growth. The drop in spending was mainly because there was no defence procurement carried out during the quarter. Fixed capital formation, however, continued to improve, rising by 4,1% q-o-q, its strongest quarterly growth rate since the last quarter of 2008, with all the three major categories of investment activity, namely, private, public corporations and government sectors recording expansions of 4,0% q-o-q, 4,4% and 3,8% respectively. …

See the full Economic Monitor