The current account deficit is above the 3% benchmark, a high-water mark generally considered to flag pending currency weakness to restore a balance between exports and imports. |
The irony is that it wasn't so long ago that South Africans were saying that the economy needs to grow at 3%. Now we're looking at 3,3% and saying it's dismal. It shows how the expectations have shifted. |
The manufacturing sector remains threatened by the persistent strength of the rand, although it should pick up from what looks to be a recovery in global manufacturing. |
The monetary policy committee cautioned last month that it may not allow growth in credit to go unchecked, inferring that it may be concerned that consumption expenditure could introduce an element of inflation sufficient to attract a monetary tightening response. |
The relative size of the mining sector is dwarfed by the contribution of the finance, real estate and business service sector's 19,5%. |
The SARB will probably do nothing with interest rates when it meets next week. |
The situation as it is, is thus inequitable and will have to be addressed by government at some stage. |
The stance the committee has taken probably provides a useful reminder that the easier interest-rate cycle has bottomed. |
This has, however, since been replaced by a cycle of higher trending growth, underpinned by record confidence; the lowest consumer interest rates since 1983; almost R89bn in personal income tax cuts since 1995; and generally sound macroeconomic, monetary and fiscal stability. |
This is going to cement the case to hike interest rates. The numbers do nothing to alter the stance now developing in the market that the next move in interest rates will be up. The consumption side of the economy needs to be slowed. |
Welfare and dependency grants, personal income tax relief, and cuts in those costs which would make housing more affordable for middle and low income earners are likely to buoy consumption expenditure, and manufacturing. |
What the bank is more likely to do (than cut rates) is intensify its moral suasion in support of a more competitive exchange rate. |
While an environment in which the rand remains strong is always appropriate for something more creative, the National Treasury is unlikely to deviate from its consistent path of removing exchange controls gradually. |
While it remains manageable, it can be argued that it is the rate at which debt levels are growing that may cause no further stimulus from the central bank. |