Nedbank Weekly Economic Monitor

13 Feb.

Nedbank Weekly Economic Monitor: Review of 6 to 10 February and preview of 13 to 17 February 2012.

• The rand came under late pressure from a weaker euro and uncertainty following news that the South African president would make an announcement of national importance on Saturday.
• Manufacturing activity remained subdued in December, with production growing by 2,4 % y-o-y.
• The unemployment rate fell to 23,9 % in the final quarter of 2011 from 25 % in the third quarter.
• Greek parliament passed another austerity package but bailout funds are not likely to be released immediately.
• Both the ECB and the BoE left their key interest rates unchanged, with the latter expanding its asset purchase programme.

Domestic

The rand traded in a relatively narrow range for most of the week before tumbling on Friday on a weaker euro and uncertainty following news that President Jacob Zuma, along with Finance Minister Pravin Gordhan and Reserve Bank Governor Gill Marcus would make an important announcement on Saturday. The unit lost about 2% against the US dollar on Friday, closing at R7,74, down from R7,52 at the previous week’s close and fell to R10,21 and R12,19 from R9,89 and R11,89 against the euro and the British pound respectively. However, fears of policy and personnel changes were unrealised with the announcement that South Africa’s bank notes would now bear the head of the country’s first democratic president, Nelson Mandela. Bonds also weakened on Friday, with yields on the benchmark R157 2015 and R186 2025 rising to 6,63% and 8,30% respectively from 6,42% and 8,07%, while those on the 3-, 5- and 10-year BESA actuaries increased to 6,38%, 7,06% and 7,98% from 6,18%, 6,87% and 7,78%.

Money market rates were generally steady, with the 3- and 6-month JIBAR closing the week unchanged at 5,53% and 5,79% respectively, while the 9- and 12-month JIBAR increased slightly to 5,98% and 6,16% from 5,95% and 6,15%.

Local equities ended lower along with global markets, which were dragged down by some profit taking and worries about violent protests in Greece on the approved harsh new austerity measures, which will result in civil service job cuts and reduction in the minimum wage. The FTSE-JSE all-share index closed at 33 892,6 on Friday, down by 1,4% over the week, with basic materials, industrials and financials down by 2,9%, 0,8% and 0,6% respectively to end at 29 909,8, 35 908,4 and 24 019,4.

Mining production continued to recover in December, rising by 3,5% m-o-m on a seasonally adjusted basis following the 12,2% increase in November. On a y-o-y basis output increased by 0,9% after a 4,4% contraction was recorded in November. Total output was up by 3,5% m-o-m on a seasonally adjusted basis, after increasing by 12,2% in November. Gold production fell by 3,2% m-o-m, while that of platinum group metals remained strong at 9,3% m-o-m from 25,5% in November, reflecting continued recovery from the sharp falls recorded in the previous two months. Nongold output rose by 2,2% y-o-y after falling by 4,4% in the previous month, while gold production remained under pressure, contracting by 8,2% y-o-y in December, its eighth consecutive annual decline. Output of platinum group metals contracted by 0,9% y-o-y, the sixth annual decline.

For the fourth quarter, total mining production rose by a seasonally adjusted and annualised 1,7% q-o-q after contracting in the previous three quarters. Gold output expanded by 19,5% q-o-q, while non-gold output fell by 0,4% q-o-q. Production of platinum group metals plunged by 22% q-o-q, while that of coal expanded by 28,1% q-o-q.

Manufacturing activity remained subdued …

See the full monitor at Weekly Economic Monitor