Nedbank Weekly Economic Monitor

25 Oct..

Nedbank Weekly Economic Monitor: Review of 17 to 21 and preview of 24 to 28 October 2011.

• Global equity markets lacked direction as concerns about the European debt crisis and slower global growth persisted.
• US economic data confirmed that inflation remains high due to elevated food and energy prices.
• The Bank of England’s Monetary Policy committee voted unanimously to expand its asset purchase programme.
• China’s economic growth slowed further in the third quarter as exports weakened.
• Domestically, consumer inflation rose further in September but this is unlikely to prompt the Reserve Bank to raise interest rates in the near future.
• Retail sales growth accelerated but the strong growth is unlikely to be maintained in the coming months.

Domestic

Weaker sentiment dragged the rand lower towards the end of the week, with the local currency closing at R8,02, R11,14 and R12,78 against the US dollar, the euro and the British pound respectively on Friday, down from R7,82, R10,86 and R12,37 at the previous week’s close.

In the capital market, bond yields were generally steady, with the benchmark R157 2015 closing at 6,69%, unchanged from the previous week’s close, the R186 2025 increased slightly to 8,41% from 8,38%, while the 3-year BESA actuaries edged up to 6,39% from 6,38%. The 5- and 10-year BESA actuaries eased to 7,14% and 8,10% respectively from 7,15% and 8,11%.

Money market rates eased over the week, with the 6-, 9- and 12-month JIBAR ending at 5,66%, 5,74% and 5,83% on Friday, down from 5,77%, 5,96% and 6,19% respectively a week earlier. The 3-month JIBAR remained steady at 5,5%.

Local equities closed slightly higher, with the FTSE-JSE all share index ending at 31 450,0, gaining 1% over the week, mainly pushed up by industrial stocks, which rose by 1,8% to end at 33 642,7. Financials closed at 21 484,8, up by 0,9%, while basic materials, in contrast, lost 0,3% to end at 28 018,9.

Consumer inflation gathered momentum in September, increasing to 5,7% up from 5,3% in August. The market had expected inflation to increase to 5,6%. Food inflation continued to pick up, increasing to 8,7% from 7,3% in September and 2,9% at the start of the year. Over the month, prices rose by 1,1%, largely due to higher prices for bread (up 0,9% m-o-m), vegetables (up 1,8% m-o-m) and fish (up 2,3%). The price of meat, sugar and sweets also increased over the month. Rising transport costs, which make up nearly 19% of the basket, also added to inflation pressures. Inflation in this category rose to 6,6%, up from 5,9% in the previous month, largely driven by higher fuel costs, …

See the full monitor at Weekly Economic Monitor