16 Jan.
Absa: SA Morning Sheet.
This is a daily economic comment …
The sheets can be downloaded daily from Absa Economic Research
It is a busy week on the South African economic calendar with a slew of data releases and events scheduled. We expect the release of consumer price inflation figures on Wednesday to show CPI remains on an upward trajectory, rising 6.2% y/y in December from 6.1% previously (consensus estimates look for 6.3%). Further upward pressure in food prices together with quarterly surveys in the housing component (OER) are expected to be the main drivers here. Excluding food, fuel and energy, we expect core inflation to measure 4.0% y/y from 3.9% y/y previously. We reiterate our view that underlying inflation is picking up and as such, we expect core inflation to end the year at 5.5%. We expect CPI to remain above the 6% target ceiling until Q2 13.
Retail sales are also released on Wednesday and here we expect sales growth to have managed a healthy 7.0% y/y rise in November from 7.4% in October. Our expectation for still-strong retail sales growth is not surprising given positive reports from listed retailers. Considering still-strong consumer dynamics – disposable income growth, robust discretionary credit extension and low debt-servicing costs – the upbeat tone should have continued into the festive season, in our view.
The highlight for markets this week, however, is likely to be on the SA Reserve Bank’s first MPC meeting and rate decision for the year on Thursday. We expect the SARB to keep the repo rate unchanged at 5.5%. Similar to the November MPC, the rhetoric in this week’s statement is likely to be that upside inflation risks outweigh the downside risks to economic growth. Why no imminent rate hike? Global uncertainty remains high enough that until the SARB deems the economy able to handle a process of policy normalisation we think it will be more tolerant than usual about rising consumer prices.
Markets: The rand weakened sharply to R8.22 on Friday after Fitch added its voice to Moody’s (last November) over concerns that unless South Africa can agree a path for deeper economic reform to address unemployment and inequality then the potential for a deterioration in credit quality is substantial. …
The sheets can be downloaded daily from Absa Economic Research
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