Ethel Hazelhurst
Reasonably upbeat economic data released last week failed to cheer the domestic stock market. The JSE all share index ended the week at 39 860 on Thursday, from 40 063 the previous Friday.
This was out of line with other emerging markets: Bloomberg reported the MSCI emerging markets index rose 1.9 percent last week to the highest level since March 15.
But the rand advanced in the week, strengthening to R9.22 to the dollar at Thursday’s close from R9.33, partly on news that South Africa’s trade deficit had contracted to R9.52 billion in February from R24.5bn in January.
The SA Revenue Service attributed the reduction in the gap between import costs and export earnings to an increase in exports of mineral products, chemical products, precious metals and machinery and electrical appliances and a decline in imports of prepared foodstuffs, chemical products, plastics and rubber, machinery and electronics and vehicles, aircraft and vessels.
However, given the huge January deficit, the cumulative deficit for the year remained high at R34.11bn, compared with R23.71bn in the same period last year.
Absa analyst Peter Worthington highlighted February’s “very significant and curious rise of R3.2bn in exports of vehicles, aircraft, and vessels. This is an increase of 80 percent on the previous month and seems likely due to some idiosyncratic transaction, the details of which are not known at this stage.
“There was also a very large R3bn drop in imports of machinery and electrical appliances.”
But he noted: “Imports of capital equipment can be quite lumpy, but we know there are more capital expenditure imports (locomotives in particular) as part of the public sector infrastructure programme.”
Another piece of good news was an improvement in the government’s finances, reported by Statistics SA.
Worthington identified a “very impressive, and perhaps surprising, 14.8 percent year-on-year surge” in revenues to government coffers in February.
He said the inflows took the 12-month rolling fiscal deficit down to 5.3 percent of gross domestic product (GDP), “after it popped up to 5.5 percent of GDP in January”.
Inflation data were also encouraging: producer inflation slowed to 5.4 percent in February from 5.8 percent in January.
Nedbank’s economic unit said the figure was lower than market expectations of 5.6 percent, but noted: “Producer inflation can be volatile and it remains to be seen how the new series will behave.”
The latest figures “are therefore unlikely to be of much significance to interest rates in the short term”.
The February number was only the second in the series based on a new index compiled by Stats SA.
Unfortunately, data from the Reserve Bank on credit demand in February struck a sombre note with a year-on-year increase of 7.8 percent.
Nomvuyo Guma, an economist at Standard Bank, said the pace of credit growth had “decelerated significantly since its December peak of 10.09 percent, pulled down by a notable moderation in the other loans and advances category”.
Guma described this category as a proxy for corporate credit demand and warned: “The slow uptake of credit by corporates despite favourable financing conditions does not bode well for economic growth this year, as it suggests corporates are yet to see any prospect of improved demand conditions in the near term.”