Author: Helmo Preuss

Extended disruption of electricity supply will exact its cost in terms of production losses during this quarter and even beyond. The Gross Domestic Product (GDP) data released by Statistics South Africa (Stats SA) exceeded the Reuters consensus forecast of a 1.6% seasonally adjusted  annualised (saa) increase in the third quarter on the second quarter by almost a half, as the actual rise was 2.2%. This brought growth in the first nine months to 0.8% year-on-year (y/y), which also exceeds the full year forecast of the South African Reserve Bank (0.6%) and Treasury (0.7%).  In the third quarter, y/y growth was…

The October inflation data surprised economists on the downside as the actual result was a 5.1% year-on-year (y/y) increase compared with an IRESS-compiled consensus forecast of 5.2% y/y and the August and September rate of 4.9% y/y. The good news for Grahamstown residents is that the Eastern Cape inflation rate was below the national average at 4.9% y/y. The annual average for the Eastern Cape was 5.3% in 2017 from 7.4% in 2016, while the national annual average rate was 5.3% in 2017 from 6.4% in 2016. The series of below consensus inflation outcomes has resulted in the ten month…

The National Association of Automobile Manufacturers of South Africa (NAAMSA)on Monday reported that new vehicle exports reached a new record high of 36 341 units, which was a 1.2% increase on the previous record set in September 2017 and 14% more than the August number and is good news for the South African economy, as it means that the rand could strengthen and reduce the cost of imported goods such as oil. The 15% boost in vehicle unit exports compared with July was one of the reasons why the foreign trade balance swung to a R9.8 billion surplus in August…

Although the South African economy entered a technical recession, defined as two consecutive quarters of contraction, in the second quarter, underlying figures suggest a more upbeat reading of growth. The economy declined by 0.9% in the second quarter on a quarter-on-quarter (q/q) seasonally-adjusted annualised (saa) basis after a 2.6% contraction in the first quarter as measured from the expenditure side, but if one excludes the change in inventories, real final sales grew by 2.0% in the second quarter after a 3.1% drop in the first quarter. Imagine the South African economy as a household. You invite six guests for supper…

Real disposable income, in other words what you get to take home after tax and inflation, increased by 0.3% year-on-year (y/y)in July after a 2.4% y/y drop in June and a 1.3% y/y decline in May according to data released by economists.co.za. They analyse the information of transfers via the South African payments system and create an index called the BankservAfrica Disposable Salary Index (BDSI) or the Take-home Pay Index. Mike Schussler from economists.co.za said take-home pay will remain above inflation for a while. These increases should help retail sales recover a little, but could also lead to increased imports,…

Continuing a series of lower than expected inflation outcomes, the June consumer inflation rate was 4.6% year-on-year (y/y) compared with the consensus forecast of a rise to 4.8% y/y. The lower than expected inflation rate eases the pressure on the South African Reserve Bank to hike interest rates to curb inflation. The March consumer inflation data surprised on the downside as most economists had expected the February data to be the low point in the current inflation trajectory, so the consensus forecast was for a rise to 4.1% y/y from February’s 4.0% y/y. Instead the inflation rate eased to 3.8%…

By Helmo Preuss Economists are expecting the first quarter contraction in the economy to be followed by a strong second quarter as that has been the pattern of the past two years. The 2.2% seasonally adjusted annualised quarter-on-quarter (q/q) contraction in the first quarter 2018 was the largest q/q decline since the 6.1% drop in the first quarter 2009. “While today’s print is certainly disappointing and suggests that full year growth may have to be downwardly revised, we are reluctant to do so for now, for two primary reasons,” First National Bank Senior Economic Analyst Jason Muscat said in his…

Real retail sales show quarterly contraction in first quarter               By Helmo Preuss The first quarter 2018 showed a 5.2% seasonally adjusted annualised decline from the fourth quarter in real retail sales despite a 4.8% year-on-year (y/y) increase in March according to Statistics South Africa (Stats SA) data after a downwardly revised 4.2% (4.9%) y/y increase in February. The quarterly decrease was due to the strong sales in the fourth quarter 2017. This means the South African economy is likely to have a quarterly contraction in the first quarter, as last week’s Stats SA data on manufacturing and mining production…

Bbeautiful and environmentally friendly  By Helmo Preuss Small hydro-electric power plants have the potential to boost economic activity in the Eastern Cape, as they can provide power to isolated rural communities where the cost of linking to the national electricity grid is prohibitive. A small hydro plant only needs a reliable source of flowing water and a height difference, the so-called head. It does not require a dam as it only diverts water from the stream or spring or waterfall into a pipe that flows into a generator and is then returned to the water course. Even in the Grahamstown…

SA current account deficit narrows to 2.5% of GDP in 2017  By Helmo Preuss The South African current account deficit on the balance of payments narrowed to 2.5% of gross domestic product (GDP) from 2.8% in 2016, the South African Reserve Bank (SARB) said in its latest Quarterly Bulletin. On a quarterly basis however, the current account deficit widened to 2.9% of GDP in the fourth quarter from 2.1% in the third quarter as import growth outpaced export growth resulting in a narrowing in the trade surplus in goods. The import penetration ratio (real merchandise imports as a ratio of…