24 Oct.
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:
In a busy week on the South African data calendar, the focus turns to the release of National Treasury’s Medium-Term Budget Policy Statement (MTBPS), which is tabled in parliament tomorrow; the SARB’s leading economic index (Tuesday); and producer price inflation figures on Thursday.
Given a somewhat more uncertain economic backdrop than that faced at the time of the February budget, we expect tomorrow’s MTBPS to reflect a deterioration in National Treasury’s economic projections. This should translate into slightly wider budget deficits announced over the forecast period compared with those announced in the February budget. Although, our budget deficit forecasts are slightly higher than previously, owing largely to a paring of our GDP projections, we think nominal GDP will prove stronger than does the National Treasury, and therefore, we still view the outcome of the budget deficit each year to be narrower than the Treasury is likely to project tomorrow.
On the local data front, we are marginally higher than Bloomberg consensus (cf. 10.4% y/y) in expecting headline producer price inflation to tick up to 10.5% y/y in September from 9.6% in August. Though this translates into a 3.3% m/m decline in the PPI, this largely reflects the switch from winter to summer electricity tariffs. However, a higher ZAR oil price in September and rising food price momentum are likely to contribute positively to the headline print, in our view.
Markets: It looks like Wednesday has become the new Sunday, as the weekend’s EU summit on how to address the euro area’s fiscal and financial crisis did not yield very much, and the new focus is on a reconvening of the summit this Wednesday. Closest to agreement appears to be the need for banks to recapitalize, with a figure of EUR108bn being the target, although finding common ground on how best to generate significantly more firepower for the EUR440bn EFSF has been more difficult. German Chancellor Merkel looks likely to spend the early part of this week consulting the Bundestag before any firm plans are agreed, highlighting the legal complexities that any leveraging of the fund create. Difficult talks are also being held between officials and banks on agreeing a much sharper writedown of Greek debt.
All of this means that euro area developments will be the lead for pretty much all global markets this week, and for South Africa we do not think that the PPI figure (Thursday) or the SARB Leading Indicator (Tuesday) will re-direct much of that attention. Tuesday’s Medium-Term Budget may well be a different story, particularly given the likelihood of some upward revision to the budget deficit targets over the projection period and some anecdotal evidence that the market fears a sharp increase in bond supply. …
The sheets can be downloaded daily from Absa Economic Research
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