Category: Inflation rate

articles-South_Africa_523234102South Africa’s economy will get a boost from perkier commodity prices, a benign inflation outlook, and better rains for the agriculture sector this year, a Reuters poll found on Thursday last week.
The 27 economists in the poll suggested growth in SA would accelerate to 1.1% this year and 1.6% next year. The South African Reserve Bank (SARB) estimated GDP expanded 0.4% last year.

“Higher commodity prices in combination with lower inflation, stable interest rates and a recovery in the agricultural sector should drive 2017 growth somewhat stronger than in 2016,” said Elize Kruger at NKC African Economics. Twelve of 14 economists believed that growth in SA has left the slow expansion trap seen in previous quarters.

SA’s growth has been choppy in the past two years, with negative quarterly performances three different times on an annualised basis since 2014. However, KPMG’s Christie Viljoen says positive growth is expected, though it will be very low.

Economists back their claims with the annualised growth rate in the SARB’s leading indicator, which has turned positive, but they caution about the risks that lie ahead.
SA’s economy relies heavily on the wellbeing of the eurozone, its biggest trading partner as a single region, and China, its biggest trading partner as a single country.
South African Reserve Bank keeps repo rate at 7%
Meanwhile, SA’s Reserve Bank (Sarb) governor Lesetja Kganyago announced on Tuesday that the repo rate will remain unchanged at 7%.

The prime lending rate, which is the figure charged by banks to customers, will remain at 10.5%.
The central bank’s Monetary Policy Committee (MPC) has left rates unchanged at 7% since March last year.

“The MPC remains focused on the medium to long-term inflation outlook, but the deterioration of the shorter term outlook requires increased vigilance,” says Kganyago.

He says the bank is concerned about climbing inflation, but expects it to stabilise later this year and return to the target range of between 3 and 6%.

Kganyago also says growth remains a concern.

“While some improvement is anticipated over the forecast period, growth is expected to remain below potential.”


“Given improvements in the inflation forecast, the weak domestic economic outlook and the assessment of the balance of risks, the MPC has unanimously decided to keep the repurchase rate unchanged at 7% per annum,” Governor Lesetja Kganyago said on Thursday.

At its second last meeting of the year, the MPC expressed concern about the overall inflation trajectory, which remains in the upper end of the inflation target range.

“The MPC assesses the risks to the inflation forecast to be more or less balanced at this stage. The current level of the rand is stronger than that implicit in the forecast, and, in conjunction with continued low levels of pass-through from the rand to inflation, the risks are assessed to have moderated somewhat,” said the Governor.

However, some of the positive factors impacting on the rand may be temporary, and the rand remains vulnerable to both domestic and external shocks.

Since the previous meeting of the MPC in July, the rand traded in the range of R14.73 and R13.28 against the US dollar and has appreciated by 6.3% against the US dollar.

The MPC said other major risks to the country’s inflation outlook relate to food prices, with the bank’s forecast still expecting them to peak in the final quarter of this year.

The bank still expects food price inflation to reach a peak in the fourth quarter of this year at around 12.3%.

“The future trajectory of these prices will be highly dependent on the normalisation of rainfall in the coming months. Favourable weather patterns could see food price inflation falling faster than that implicit in the forecast,” said Kganyago.

Despite a positive growth surprise of 3.3% in the second quarter of 2016, the domestic economy remains weak, said the central bank.

The Reserve Bank announced that it has revised upward the forecast for economic growth for 2016 to 0.4%.The forecasts for the next two years have been increased marginally by 0.1 %   to 1.2 % and 1.6 % respectively.

The bank noted that while growth was more favourable in the second quarter, data suggests that the improvement is unlikely to be sustained in the third quarter.

Data released by Statistics South Africa on Wednesday showed that the annual Consumer Price Index (CPI) eased to 5.9% in August 2016.

On Thursday, the bank said its latest inflation forecast has improved with inflation now expected to peak at 6.7% in the fourth quarter of 2016, compared with 7.1 % previously. Inflation is expected to average 6.4 % in 2016 and 5.8 % in 2017.

The forecast for 2018 is unchanged at an average of 5.5%.

When coming to the petrol price, the bank expects it to rise in October following two consecutive months of price declines totalling R1.17 per litre.

“The MPC is of the view that should current forecasts transpire, we may be close to the end of the tightening cycle. The committee is aware that a number of the favourable factors that have contributed to the improved outlook can change very quickly resulting in a reassessment of this view,” said Kganyago.


Source Eprop

Analyzing industrial property by box size reveals that there is currently more space available in middle of the range properties, particularly those sized 2,500sqm to 5,000sqm. Interestingly, the smallest and largest box size segments recorded the largest improvements in vacancy rate. This is perhaps surprising given the state of the economy and also the fact that smaller tenants may be more vulnerable to exchange rate movements. What it could potentially indicate is that most occupiers are downsizing their operations – requiring less space.


Reserve Bank

South Africa’s central bank raised its benchmark interest rate for the first time in a year, following through with warnings to tighten monetary policy as inflation threatens to exceed the bank’s target.

The repurchase rate was increased by 25 basis points to 6%, Governor Lesetja Kganyago told reporters on Thursday in Pretoria. This was in line with the forecasts of 17 of the 31 economists surveyed by Bloomberg. The rest expected no change.

The Reserve Bank kept borrowing costs unchanged since July last year to help support an economy hit by strikes, power shortages and falling global metal prices.

While inflation has stayed within the 3% to 6% target since September, a weaker rand and rising electricity costs threaten to push it outside of that band.

The central bank wants to “ensure that inflation expectations remain firmly anchored”, Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities, said in an e-mail to clients before the decision.

African central banks are bucking a global trend by raising interest rates to ward off inflation risks stemming from weaker currencies put under pressure by a slump in the commodities that make up the bulk of their exports. Uganda, Namibia, Angola, Kenya and Ghana have all tightened monetary policy this year.

Speculation that the United States Federal Reserve may increase interest rates this year has curbed appetite for emerging-market assets, contributing to the rand’s 7% slump against the dollar this year. That is adding to import costs, including gasoline prices.

An energy crisis is clouding the outlook for economic growth and inflation. Eskom Holdings is implementing regular rolling blackouts because it can’t meet power demand, hurting retailers and manufacturers. The state-owned utility is seeking to raise tariffs, even though its request for a 25% increase was denied last month.

Africa’s second-largest economy expanded by 1.5% last year, the slowest growth since the 2009 recession.– Bloomberg

Original Article: Mail & Guardian

The repo rate will remain unchanged at 5.75 percent, SA Reserve Bank governor Lesetja Kganyago said on Thursday.

The prime lending rate, the interest charged by banks to consumers, remains steady at 9,25 percent.
According to the Bank’s latest forecasts, inflation is now expected to average 4.8% in 2015, compared with the previous forecast of 3.8%.

A first quarter average of 4.2 percent is now projected as the low point, compared with 3.5 percent previously. The strong base effects in the first quarter of 2016 are expected to result in a temporary one-quarter breach of the inflation target during that quarter, at 6.7 percent, with the average for the year expected to measure 5.9% compared with 5.4% previously.

Inflation is expected to average 5.5% in the final quarter of the year, compared with the previous forecast of 5.3%.

This is the lowest CPI has been since April 2011 when CPI stood at 4.2%. “The headline CPI (for all urban areas) annual inflation rate in January 2015 was 4.4%. This rate was 0.9% lower than the corresponding annual rate of 5.3% in December 2014,” said Stats SA on Wednesday.

On average, prices decreased by 0.2% between December 2014 and January 2015. According to Stats SA, the food and non-alcoholic beverages index increased by 0.9% between December 2014 and January 2015 while the annual rate decreased to 6.5% in January from 7.2% in December.

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