Johannesburg - South Africa’s trade account swung to a deficit in October, but the shortfall was lower than forecast as exports performed better than expected.
Data from the SA Revenue Services (SARS) showed on Wedesday that the trade balance switched to R4.41 billion in October from a revised R6.9 billion surplus in September. But SARS said exports fell 11.1 percent on a month-on-month basis, while imports were up 0.4 percent.
The news rattled the rand with the currency dropping from an opening of R13.8667 to R14.0331 by 5pm.
The year to date deficit of R14.35 billion is an improvement from the comparable period last year of R59.5 billion.
John Cairns at Rand Merchant Bank said October saw the worst trade balance of the year thanks to Christmas-related imports.
Nedbank said these figures suggested the weaker rand supported exports while dampening imports. “The rand faces pressures from both the global and domestic fronts, with the US interest rate hike and the uncertain policies of the incoming administration likely to put emerging markets under pressure.”
The bank said imports of capital equipment would also remain weak as the private sector remained cautious about committing to large expansion projects.
“Global conditions remain lacklustre, which with low commodity prices, will hamper export performance in the short term,” Nedbank said. “Import growth is also likely to be modest as household demand will be hurt by weak confidence, as well as high inflation and debt service costs.”
Trade performance
Elize Kruger, an analyst at NKC African Economics, said monthly trade statistics were volatile, but the cumulative picture suggested an improved trade performance in the first 10 months of this year.
“The narrower trade deficit reflects the benefit from a weaker rand exchange rate during the past 12 to 18 months, the moderate recovery in commodity prices, as well as the dismal domestic demand that inhibits imports during 2016.”
She said an improving trade balance would feed into a lower current account deficit this year. “We forecast a current account deficit of 4 percent of (gross domestic product) for 2016 compared to 4.3 percent in 2015.”
Investec economist Kamilla Kaplan said subdued domestic economic activity suppressed import growth. She said although export demand had been comparatively stronger, there were downside risks to South Africa’s potential export growth trajectory.
“Depressed business confidence has been reflected in the retrenchment in private sector investment rates. On a quarter-on-quarter seasonally adjusted annualised basis, private investment fell by 3.1 percent, following a decline of 13.3 percent in the first quarter of 2016,” Kaplan said.
She said similarly, household consumption expenditure contracted 1.7 percent in the first quarter and rose by just 1 percent in the second quarter, compared with the increase of 1.7 percent last year.
“The Reserve Bank expects consumers to remain under pressure for some time.”
She said these risks were associated with the modest global growth outlook and weak global trade momentum.