South Africa Economy Watch

Price-adjusted retail sales decreased in June by an annual 6.7% following a 4.4% drop in May. For the three months to June, sales contracted by 6% relative to the corresponding period a year earlier. The household debt-to-disposable earnings ratio continued to rise in the first three months of the or – if solely marginally to 76.7% from 76.3% within the final quarter of 2008 – implying that financial strain on households remained significant.

Encouragingly, electricity consumption, typically a useful indicator of financial activity, rose in June by 1% over might (s.a.) and by 2.9% (s.a.) in Q2 over Q1, which would seem to affirm that the recession eased markedly in Q2. The weakening was fairly broad based, with enterprise exercise, new sales orders, suppliers performances, and input costs falling within the month.

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Actually South Africa’s manufacturing PMI appears to be lagging the PMIs of the nation’s major exporting companions (US, Germany, Japan and UK) by two-to-six months. While these economies reached the troughs of their PMIs between November 2008 and February 2009, their PMIs have rebounded nearly seven occasions as a lot because the South Africa one, since hitting their respective troughs.

This means that by October the decline in manufacturing may very well be over and out of the system, offered that is that the gradual but steady restoration in the three above mentioned economies continues, which is removed from guaranteed. The inflation measure targeted by the South African Reserve Bank until the end of 2008 was the buyer price index excluding mortgage interest prices for metropolitan and other city areas (CPIX).

The 12 months-on-year inflation price as measured by CPIX peaked at 13.6 per cent in August 2008 and then declined constantly to 10.3 per cent in December. In keeping with the central financial institution the main drivers of inflation in the course of the final quarter of 2008 have been food prices, gasoline, and power (electricity costs), and transport (petrol prices). Average CPIX inflation for the calendar for 2008 was 11.Three per cent. Since the release of the January 2009 CPI knowledge, the focused inflation measure has been the headline CPI (CPI for all urban areas).

This new CPI consists of a lot of adjustments of methodology when in comparison with the earlier CPI. Negative development, depressed confidence, and steadily rising unemployment certainly do not make it look like it’s. The rand has now climbed 21 p.c against the greenback this year as benchmark interest rates fell to near zero within the U.S.

Europe compared with 7 percent in South Africa, making the South African foreign money a favorite for the so referred to as carry-trades where traders borrow cash in international locations with low curiosity rates to spend money on markets with greater returns. The rand provided the third-best carry-commerce return of the sixteen main currencies monitored by Bloomberg final week. Much of the ZAR transfer has been carefully correlated with the return of investor danger appetite.