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Absa: SA Morning Sheet – daily economic comment

30 Jan.

Absa: SA Morning Sheet.

This is a daily economic comment …

The sheets can be downloaded daily from Absa Economic Research

An extract fro today’s sheet is provided as an example:

A host of smaller but nevertheless important data releases is scheduled for South Africa this week, kicking off with the release of private sector credit extension (PSCE) and trade balance figures on Tuesday; PMI numbers on Wednesday and NAAMSA new vehicle sales statistics on Thursday. We are marginally lower than Bloomberg consensus forecasts (cf. 5.9%) in expecting PSCE growth to have moderated to 5.8% y/y in December following the prior month’s 6.2% growth print. Despite the headline moderation, we still expect m/m growth in total credit extension to have risen 0.4% given consumer spending into the festive season. Unfortunately, we do not expect growth in household credit to be driven through the more durable components of credit (mortgage advances etc), but rather a further pickup in smaller and unsecured components such as credit cards, store cards and personal loans, etc.

PMI figures for January will no doubt be keenly watched by the market to see whether the outlook for SA’s manufacturing sector is looking a little brighter after the index slipped back below its neutral level of 50 (49.4) in December last year. In our view, still significant global risks and uncertainty along with a still struggling domestic manufacturing sector are likely to leave the index hovering around its neutral level of 50 in January.

Finally, NAAMSA new vehicle sales statistics on Thursday are likely to continue to reflect the relatively positive consumer dynamics in the economy provided through low interest rates and high nominal incomes after still relatively robust sales growth of 11.0% y/y in December – though we do expect some modest slowdown in the y/y growth rates in sales given the strong pick-up in sales in the first half of 2011.

Market strategy: Although there are growing hopes that private Greek bondholders and the authorities are close to agreeing to restructure of their debt holdings, the euro has stopped strengthening ahead of this morning’s EU finance ministers meeting. At the meeting, the details of this Greek debt restructuring will be discussed, so as to determine whether or not to grant the debt-laden nation further financial assistance, which would in turn be used by Greece to repay next month’s €14.5bn worth of maturing debt. If consensus on these restructuring and financial bailout issues is reached then there is expected to be some extended euro short covering, which in turn would be supportive of a fresh wave of rand strength. The rand was one of the best performing currencies over the past week and remains heavily governed by the level of global risk appetite. The stronger rand has also ensured and extended flattening of the yield curve, not to mention that foreign appetite for SA scrip has continued to gain momentum. The week’s domestic data is largely two-tier, and so more likely to be of interest to economists as they fine tune their 2012 views, rather than the domestic bond or equity market. …

The sheets can be downloaded daily from Absa Economic Research

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About Coastal Roy

A consultant experienced in the financial sector in Africa and with a background of central banking, the financial system and information technology. Area of expertise: - Financial market development and regulation. - Payment, clearing and settlement systems modernisation and regulation. - Strategy and policy development for central banks and the financial sector. - Capacity building, advising and mentoring in financial sector development. Educational qualifications: - Master of Business Leadership, degree; UNISA - BSc (Hons) degree in Physics, Manchester University


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