Nedbank Weekly Economic Monitor

28 Nov.

Nedbank Weekly Economic Monitor: Review of 21 to 25 November and preview of 28 November to 2 December 2011.

• Global equities remained weak on worries about global growth and European debt problems.
• The rand fell to its lowest level since April 2009 on heightened risk aversion.
• Consumer inflation gathered momentum in October, increasing to 6 % y-o-y up from 5,7 % y-o-y in September.
• The US’ third quarter gdp growth was revised downwards to an annualised 2 % q-o-q, compared with an initial estimate of 2,5 %.
• UK gdp grew more than expected in the third quarter, expanding by 0,5 % q-o-q, up from 0,2 % in the second quarter.

Domestic

The rand weakened further last week on worries about global growth and risk aversion over continued concerns about the European debt situation. The local unit was also depressed further by news that the South African Parliament had approved the controversial Protection of State Information Bill, falling to R8,57 on Wednesday, its weakest closing since April 2009. However, the rand then recovered some ground but still ended on a weaker note at R8,52, R11,27 and R13,13 against the US dollar, the euro and the British pound respectively on Friday, down from R8,19, R10,94 and R12,94 at the previous week’s close.

In the capital market, yields on the benchmark R157 2015 and R186 2025 rose further to 7,08% and 8,66% respectively from 6,78% and 8,44%, and those on the 3-, 5- and 10-year BESA actuaries increased to 6,75%, 7,42% and 8,28% from 6,50%, 7,19% and 8,12%.

Money market rates also increased over the week, with the 3-, 6-, 9- and 12-month JIBAR ending at 5,58%, 5,76%, 5,97% and 6,05% respectively on Friday, up from 5,54%, 5,73%, 5,85% and 5,97% at the previous week’s close.

Local equities ended lower in line with weaker global markets. The FTSE-JSE all-share index lost 2,2% over the week, ending at 31 124,0 on Friday. Industrials and financials ended at 33 242,3 and 20 977,0 respectively, down by 1,1% and 1,3%. Basic materials lost 3,7 to end at 27 885,5, with the gold and platinum indices falling by 1,2% and 6,1%.

Consumer inflation gathered momentum in October, increasing to 6% y-o-y up from 5,7% in September. Food inflation continued to pick up, increasing to 11% from 8,7% in September and 2,9% at the start of the year. Over the month, prices rose by 2,2%, largely due to higher prices for bread (up 1,4% m-o-m), vegetables (up 7,5% m-o-m) and meat (up 2,7% m-o-m). Rising transport costs, which make up nearly 19% of the basket, also added to inflation pressures. Inflation in this category rose to 6,7%, up from 6,6% in the previous month, largely driven by higher fuel costs, which rose by 30%. Falling vehicle prices continue to act as a damper on inflation in this category, with vehicle prices falling by 1,2% over the year. Services inflation picked up slightly in October, increasing to 5,5% from 5,4% in the previous month, due to increases in insurance premiums as well as other services. Durable goods prices continued to fall on a year-on-year basis, declining by 2,7%, largely due to lower prices of cars, furniture and appliances compared with this time last year. Semi-durable goods inflation moderated slightly to 1,4% from 2,2%. In contrast, non-durable goods inflation rose to 11%, up from 9,4% in September. …

See the full monitor at Weekly Economic Monitor