Nedbank Weekly Economic Monitor

14 Dec.

Nedbank Weekly Economic Monitor: Review of 5 to 9 and preview of 12 to 16 December 2011.

This is the last Weekly Economic Monitor for 2011, and we would like to take this opportunity to wish all our readers a joyous festive season. The next Monitor will be released on 9 January 2011.

• Global equity markets were mixed last week, following the previous week’s strong rally
• The current account deficit widened to 3,8% of gdp in the third quarter from 2,9% in the second quarter, mainly due a narrower trade surplus.
• Growth in gross domestic expenditure accelerated to a seasonally adjusted and annualised 4,2% in the third quarter from 1,1% in the second quarter.
• Manufacturing production slowed to a dismal 1% y-o-y in October, down from 8,1% in September.
• The Bank of England kept the interest rate unchanged at a record low of 0,5%.

Domestic

The rand remained weak along with the euro, which earlier in the week was depressed by S&P’s warning that it could cut credit ratings across the eurozone as leaders are failing to reach an agreement on how they would tackle the region’s debt crisis, while the release of the larger than expected current account deficit for the third quarter also added pressure on the local unit, with the rand falling to R8,22 against the US dollar on Thursday. However, the local unit recovered some ground at the end of the week, ending at R8,09, R10,78 and R12,68 against the US dollar, the euro and the British pound respectively, down from R8,03, R10,66 and R12,53 at the previous week’s close.

Bonds weakened in line with the rand over the week, with the benchmark R157 2015 and R186 2025 rising to 6,77% and 8,49% from 6,61% and 8,31%, and the 3-, 5- and 10-year BESA actuaries increased to 6,43%, 7,16% and 8,13% respectively from 6,23%, 6,95% and 7,91%. In the money market, the 3- month JIBAR was steady at 5,58%, the 6- month JIBAR edged down slightly to 5,74% from 5,75%, while the 9- and 12-month JIBAR fell to 5,86% and 5,98% respectively from 5,91% and 6,05%.

Local equities closed slightly higher on Friday. The FTSE-JSE all-share index gained a marginal 0,1% over the week, ending at 32 632,9, with industrials and financials up by 0,2% and 1,1% respectively to close at 34 530,8 and 22 038,5. In contrast, basic materials lost 0,8% to end at 29 428,1.za

The South African Reserve Bank’s Quarterly Bulletin showed that the current account deficit widened to 3,8% of gdp in the third quarter from a revised 2,9% in the second quarter (previously 3,3%) – its highest level since the first quarter of 2010 – and was higher than market expectations of 3,7% and our forecast of a 3,5% deficit. A lower increase in exports relative to imports narrowed the trade surplus to a seasonally adjusted and annualised R18,1 billion from a revised R26,8 billion (previously R15,2 billion). Merchandise exports rose by 3,3% q-o-q to a seasonally adjusted and annualised R674,4 billion from R653,0 billion, with export volumes up by 1,0% during the quarter. Merchandise imports were up by 6,2% q-o-q to a seasonally adjusted and annualised R739,4 billion from R696,3 billion. Volumes rose by 4,6% during the quarter, with non-oil imports back to preglobal credit crunch levels on the back of buoyant consumer demand and capital equipment imports. In the first three quarters of this year merchandise imports were 17% higher compared to the same period in 2010. …

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