Nedbank Weekly Economic Monitor

03 Oct.

Nedbank Weekly Economic Monitor: Review of 26 to 30 September and preview of 3 to 7 October 2011.

• Global equities generally ended the week higher, as sentiment improved following the German parliament’s decision to extend the European rescue fund.
• Private sector credit extension picked up further in August, increasing to 6,1% y-o-y from 5,7% y-o-y in July.
• Producer inflation gained further momentum, rising to 9,6% y-o-y in August from 8,9% in July, largely due to higher agricultural and metal prices.
• The trade deficit remained large at R3,7 billion in August following R3,9 billion deficit in July.
• In the US, companies remain reluctant to hire new workers. Initial jobless claims declined by 37 000 to 391 000 for the week ending 24 September.
• In Japan, the unemployment rate fell to 4,3% in August, down from 4,7% in July. This was the first improvement in three months. Core consumer inflation accelerated to a new decade high in June, as energy prices continued to rise.

Domestic

The rand recovered some ground last week on better risk sentiment following news that the German government had voted to increase its bailout package for the Eurozone. The unit ended at R8,09 against the US dollar on Friday, up slightly from the previous week’s close of R8,10 and rose to R10,93 from R10,83 against the euro. However, the unit remained on the back foot against the British pound, falling to R12,60 from R12,50.

Bonds consolidated over the week, with yields on the benchmark R157 2015 and R186 2025 as well as the 3-, 5- and 10-year BESA actuaries falling to 6,99%, 8,60%, 6,67%, 7,44% and 8,35% respectively from 7,13%, 8,66%, 6,83%, 7,57% and 8,41%.

In the money market, the 3-, 6-, 9- and 12-month JIBAR rose to at 5,77%, 5,96% and 6,19% respectively from 5,67%, 5,79% and 5,88%, while the 3-month JIBAR remained steady at 5,5%.

Local equities were dragged down by weaker resource stocks and volatile global markets. The FTSE-JSE all share index closed the week at 29 674,2, down by 1,3%. Basic materials lost 3,7% to end at 26 405,8, with the gold and platinum indices down by 4,5% and 2,3% respectively. Financials were 1,3% higher at 20 694,5, while industrials dropped 0,7% at 31 556,8.

Producer inflation gained further momentum, rising to 9,6% y-o-y in August, up from 8,9% in July. This was well ahead of market expectations of an increase to 9%. Over the month, prices rose by 1%, largely due to higher agricultural and metal prices. Food prices at the agricultural level rose by 2,6% m-o-m, due to higher prices for grain (up 3,8%) as well as fruit and nuts (up 4,6%). Over the year, inflation in this category moderated to 3,6% from 5% in July. Manufactured food prices rose by 0,6% over the month, due to higher prices for fruit as well as grain and dairy products. Food inflation at the manufactured level increased to 7,2% y-o-y, up from 6,3% in the previous month. Inflation in the mining and quarrying category picked up, increasing from 11,8% y-o-y to 12,3% in August, with the most significant contribution to the increase coming from metal ores. Over the month, this category rose by 2,6%, due to higher prices for oil, coal and metal ores. Inflation at the manufactured level picked up to 6% y-o-y, up from 5,1% y-o-y in the previous month. Inflation within this category continues to be driven by food (up 7,2%), chemicals (up 7,3%) as well as products of pretroleum and coal (up 25,3%) and metal products (up 7,2%). …

See the full monitor at Weekly Economic Monitor