File picture: Denis Farrell
Johannesburg - South Africa recorded a larger-than-expected surplus in December, largely due to a sharp fall in imports as the country continued to see subdued consumer and business confidence.

The trade surplus stood at R12 billion, way above market expectations of a R6 billion surplus, from a deficit of R7 billon, data from Statistics SA revealed on Tuesday.

The data showed imports had fallen nearly 20 percent to R19.75 billion in the month. Imports of equipment components fell the most, by 53 percent, followed by clothing and toys, as well as textiles, which decreased 45 percent and 38 percent, respectively.

Investec economist Kamilla Kaplan said traditionally, the trade account registered a surplus in the month of December mainly on account of a steep decline in imports.

She said the surplus was unsurprising given the low levels of growth in an economy where businesses and people were spending less money.

Standard Bank head of commercial banking Karl Gotte said the World Bank mentioned in its South Africa Economic update that 2016 might mark the trough of South Africa’s business cycle and that a slight recovery is expected in 2017.

“This expectation is to be driven by rising commodity prices and increase in credit, stimulating household demand as well as the lower inflationary pressures due to a more limited drought effect on food prices.”

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Gotte said the Reserve Bank had left the repo rate unchanged at 7 percent, but had warned that it might hike interest rates should higher global oil prices or a hit to the rand were to cause above-target inflation rates to persist.

“The rand remains vulnerable to surprises from external markets. We need to look into ways that stimulate exports as we have experienced a long period of stagnation.”

Consumer confidence slipped deeper into negative territory in the fourth quarter of 2016, while fixed investments by companies decreased for a fourth consecutive quarter in the same period as private businesses, in particular, cut spending.

The Reserve Bank last week estimated growth at only 1.1 percent in 2017, well short of the government’s aim of 5 percent annual growth needed to reduce record unemployment and the risk of credit downgrades to sub-investment. 

- Additional reporting by Reuters.