Nedbank Weekly Economic Monitor

10 Jan.

Nedbank Weekly Economic Monitor: Review of 12 December 2011 to 13 January 2012 and preview of 9 to 13 January 2012.

• Global equities were generally firmer last week after ending 2011 on a weak note.
• Local consumer inflation came in below market expectations in November, increasing to 6,1% y-o-y up from 6% y-o-y in October.
• Broad money supply growth grew at an annual rate of 7,2% and by 1,5% in November. Private sector credit extension rose by 6,2% y-o-y in November from 5,5% in October.
• The trade deficit remained unexpectedly high at R8,04 billion in November following October’s large shortfall of R9,58 billion.

Domestic

The rand was volatile during the festive season, with its movement driven by ebbs and flows in risk sentiment. The unit ended the year at R8,07 against the US dollar, down by 21,9% compared with the end of 2010. However, this was closer to the range of R8,01 to R8,45 over the festive season. Over the past week, the rand remained softer although its weakness was partly contained by the release of better than expected US employment data, which boosted sentiment. The rand closed at R8,17 against the US dollar on Friday, down from R8,09 on 9 December (the date of our last monitor). However, the unit firmed to R10,39 and R12,60 against the euro and the British pound respectively from R10,78 and R12,68 during the same period.

Bond yields have increased, with the benchmark R157 2015 and R186 2025 rising to 6,84% and 8,62% from 6,77% and 8,49%, and the 3-, 5- and 10-year BESA actuaries increasing to 6,51%, 7,26% and 8,25% respectively from 6,43%, 7,16% and 8,13%.

Money market rates rose during the review period, with the 3-, 6-, 9- and 12-month JIBAR closing at 5,53%, 5,79%, 5,94% and 6,08% respectively from 5,51%, 5,74%, 5,86% and 5,98%.

Equities were also volatile during the festive period. In line with global markets, the FTSEJSE all-share index ended higher on Friday, underpinned by the release of better-thanexpected US employment numbers as well as improved profit outlook. The FTSE-JSE allshare index closed at 32 749,6, up by a marginal 0,4% from 32 632,9 on 9 December, with financials ending at 22 686,1 (up by 2,9% during the review period) and industrials at 34 794,9 (up by 0,8%). In contrast, basic materials lost 1% over the period, ending at 29 142,4 on Friday.

Consumer inflation came in below market expectations in November, increasing to 6,1% yo- y, up from 6% y-o-y in October. Food inflation continued to pick up, increasing to 11,1% from 11% in October and 2,9% at the start of the year. Over the month, prices rose by 0,6%, largely due to higher prices for bread (up 1,5% m-o-m), fruit (up 5,6% m-o-m) and meat (up 2% m-o-m). Rising transport costs also added to inflation pressures. Inflation in this category rose to 6,9%, up from 6,7% in the previous month, largely driven by higher fuel costs, which rose by 29,6% y-o-y. Falling vehicle prices continue to act as a damper on inflation in this category, with vehicle prices falling by 0,8% over the year. Services inflation remained unchanged at 5,5% in November. Durable goods prices continued to fall on a year-on-year basis, declining by 2,4%, largely due to lower prices of cars, furniture and appliances compared to this time last year. Semi-durable goods inflation rose slightly to 1,7% from 1,4%. In contrast, non-durable goods inflation rose to 11,1%, up from 11% in October. …

See the full monitor at Weekly Economic Monitor