Nedbank: Trade data

01 Oct.

Nedbank Economic Commentary: Trade data August 2011.

Another large trade deficit as exports improve from a low base while imports remain strong.

• Another massive trade deficit of R3,7 billion was recorded in August, well above the market consensus of a R550 million deficit. Exports were up by 8,0% m-o-m and 25,7% y-o-y, while imports increased by 7,2% m-o-m and 21,7% y-o-y.
• Exports benefited from higher values of ‘mineral products’, ‘precious or semi-precious stones’, ‘base metals’, ‘electrical equipment’ as well as ‘vehicles and equipment’, while imports were boosted by the rise in ‘electrical equipment’, ‘mineral products’, ‘chemical products’ as well as ‘vehicles and equipment’.
• The global economy lost momentum in the second quarter and the weak conditions spilled over into the third quarter. This has had a negative impact on global trade, with trade volumes having declined in recent months. Global commodity prices have come off their highs reached in April and this has depressed the value of South Africa’s exports. Imports, on the other hand, have continued to benefit from firm consumer incomes and the improvement in fixed investment spending.
• Exports are likely to come under pressure in the coming months as global demand wobbles, while imports should remain relatively firm, although 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 a 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 the third quarter of 2012.

Comment

The trade deficit remained high in August, indicating that the contribution of trade to gdp is likely to be negative in the third quarter.

Imports were boosted by ‘mineral products’ (5,3% m-o-m), ‘chemical products’ (6,4% m-o-m), ‘electrical equipment’ (5,1% m-o-m) and ‘vehicles and equipment’ (0,7% m-o-m), which rose by 57,0%, 24,8%, 10,8% and 19,1% on a y-o-y basis, respectively. Imports of motor vehicle parts were up by 16,5% m-o-m and 13,6% y-o-y.

Exports also rose during August, as ‘mineral products’ (4,4% m-o-m), ‘precious or semiprecious stones’ (4,7% m-o-m), ‘base metals’ (8,3% m-o-m), ‘electrical equipment’ (14,5% mo- m) as well as ‘vehicles and equipment’ (6,7% m-o-m) increased. These categories were up by 56,2%, 24,3%, 13,7%, 25,4% and 21,6% on a y-o-y basis, respectively. …

See the full Commentary