Nedbank Weekly Economic Monitor

14 May.

Nedbank Weekly Economic Monitor: Review of 7 to 11 May and preview of 14 to 18 May 2012.

• The rand was hurt by heightened risk aversion, falling to its weakest level since mid-January against the US dollar.
• Manufacturing production disappointed in March, with the annual growth rate falling to 2,7% from 4% in February.
• Mining production also remained weak in March, with total output dropping by 9,8% y-o-y following a 13,4% decline in February.
• The euro was under pressure last week following the triumph of the anti-austerity lobby in France and Greece last week.
• US producer inflation fell on lower energy prices and base effects.
• Eurozone industrial production remained weak in April, • Germany’s industrial output rose in March, while it fell in the UK.
• The Bank of England left its key interest rate unchanged.

Domestic

Continued political turmoil in Europe and concerns about the Eurozone debt crisis heightened risk aversion last week. This, together with the release of weaker-than-expected local production data, which increased expectations that the South African Reserve Bank will keep interest rates lower for longer, hurt the rand. The local unit breached the critical R8 level against the US dollar on Wednesday and closed the week at its lowest level since mid-January, falling to R8,10 against the US dollar from R7,80 at the previous week’s close. It also weakened to R10,45 and R13,01 against the euro and the British pound respectively from R10,20 and R12,59.

Bonds weakened in line with the rand. Yields on the R186 2025 and the R157 2015 rose to 6,44% and 8,31% respectively on Friday from 6,37% and 8,08% a week earlier, while those on the 3-, 5- and 12-year BESA actuaries increased to 6,08%, 6,90% and 7,88% from 6,03%, 6,80% and 7,69%.

In the money market, the 3-month JIBAR was steady at 5,53%, the 6-month JIBAR edged up to 5,81% from 5,80%, while the 9- and 12-month JIBAR rose to 5,96% and 6,17% respectively from 5,94% and 6,15%.

Local equities were dragged down by international markets. The FTSE-JSE all-share index lost 0,3% over the week, closing at 34 038,5 on Friday, with financials and industrials down by 0,1% and 0,9% respectively to end at 25 469,7 and 38 272,0.

However, basic materials gained a marginal 0,2% to close at 26 971,5.

Manufacturing production disappointed in March, coming out much weaker than the consensus forecast of a 3,3% y-o-y increase. Instead production fell by a seasonally adjusted 4,3% over the month and a sharp 2,7% over the year, down from 4% y-o-y growth in February. In March, output in all almost all major industries either slowed sharply or declined compared with the same period a year ago. The sharpest contractions were recorded in ‘other manufacturing’, ‘motor vehicles, parts and accessories’, ‘glass and other non-metallic mineral products’ as well as ‘food and beverages’. q-o-q), ‘furniture and other manufacturing’ (up by 6,1% q-o-q) as well as ‘basic iron and steel, non-ferrous metal products, metal products and machinery’ (up by 1,6% q-o-q).

In the first quarter of 2012 manufacturing output rose by a seasonally adjusted 1,9% q-o-q, supported mainly by stronger performance from ‘petroleum, chemical products, rubber and plastic products’ (up by a seasonally adjusted 3,8% q-o-q), ‘motor vehicles, parts and accessories and other transport equipment’ (up by 6,2% q-o-q).

Mining production also remained weak in March as output of key minerals fell further on an annual basis on the back of maintenance shutdowns at key producers. …

See the full Economic Monitor