Snapshot of SA Economy Kgotso Radira 1 September 29
Economic Outlook
Global share indices 2 Indices 18 16 14 12 1 8 6 4 25 26 27 28 29 S&P 5 FTSE 1 DAX Nikkei 3
Global interest rates 7 % 6 5 4 3 2 1 1999 21 23 25 27 29 UK US 4
Consumer Confidence 16 14 US Euro 12 1-1 8-2 6 4-3 2 1985 1988 1991 1994 1997 2 23 26 29-4 1985 1988 1991 1994 1997 2 23 26 29 1 UK -1-2 -3 5-4 1985 1988 1991 1994 1997 2 23 26 29
Leading business cycle indicators for SA and its major trading partners 12 Index 14 11 12 1 9 8 1 8 6 4 7 2 6 6 1995 1997 1999 21 23 25 27 29 US Euro UK Japan SA
Global PMI, signalling an improvement in production 7 Index 65 6 55 5 45 4 35 3 24 25 26 27 28 29 7 Global PM I Services
the global economy continues to show signs of stabilisation.. 2 % qqsaa 15 1 5-5 -1 198 1984 1988 1992 1996 2 24 28 SA GDP US GDP Eurozone UK 8
9 7 75 8 85 9 95 1 15 Jan- 8 Mar- 8 May- 8 Jul- 8 Sep- 8 Nov- 8 Jan- 9 Apr- 9 Jun- 9 Aug- 9 7 9 11 13 15 17 19 21 23 Jan- 8 Mar- 8 Jun- 8 Aug- 8 Nov- 8 Feb- 9 Apr- 9 Jul- 9 3 5 7 9 11 13 15 Jan- 8 Mar- 8 Jun- 8 Aug- 8 Nov- 8 Feb- 9 Apr- 9 Jul- 9 Oct- 9 Brent Crude oil Platinum Commodity prices are rising.. Gold
.. basket of commodities % y/y 1 8 6 4 2-2 -4-6 21 22 23 24 25 26 27 28 29 1 Economist Commodity Prices
11 Exchange rates
The rand continues to strengthen.. 12 Dollar 15 Euro 11 14 1 9 13 8 12 7 11 6 Jan- 8 Mar- 8 Jun- 8 Aug- 8 Nov- 8 Feb- 9 Apr- 9 Jul- 9 Oct- 9 1 Jan-8 Mar-8 Jun-8 Aug-8 Nov-8 Feb-9 Apr-9 Jul-9 2 Pound 19 18 17 16 15 14 13 12 12 Jan- 8 Mar- 8 May- 8 Jul- 8 Sep- 8 Nov- 8 Jan- 9 Apr- 9 Jun- 9 Aug- 9
the trade-weighted rand is relatively unchanged... % change 4 3 2 1-1 -2-3 Euro 35.7% USD 15.15% GBP 14.91% JPY 1.26% -4 22 23 25 26 28 29 y/y 13
1 Jan =1 similar to other commodity trading economies.. 17 Index 16 15 14 13 12 11 1 9 Jan-8 Mar-8 Jun-8 Aug-8 Nov-8 Feb-9 Apr-9 Jul-9 Oct-9 USDNZD USDCAD USDAUD USD ZAR 14
1 Jan =1 also an emerging market story.. Index 155 145 135 125 115 15 95 175 165 155 145 135 125 115 15 85 Jan-8 Mar-8 Jun-8 Aug-8 Nov-8 Feb-9 Apr-9 Jul-9 95 15 Brazil Turkey SA
the dollar has also been under pressure. 1.5 1.45 1.4 1.35 1.3 1.25 Jan-9 Mar-9 May-9 Jul-9 Sep-9 EURUSD 16
3 25 2 15 1 5-5 -1-15 -2 $bn..mainly due to an outflow of funds from the US. 2 21 22 23 24 25 26 27 28 29 17 Foreign net purchases of US securities
these funds have flowed to emerging markets, including SA equities.. 15,, Rm's 1,, 5,, -5,, -1,, -15,, -2,, -25,, 18-3,, 1994 1996 1998 2 22 24 26 28 Foreign purchases of SA equities
.and into SA bonds. 2 R'ms 15 1 5-5 -1-15 -2 1994 1996 1998 2 22 24 26 28 Foreign purchases of SA gilts 19
the rand is expected to remain at appreciated levels, supported by signs of stabilisation of the global economy (rising commodity prices) Q1.9 Q2.9 Q3.9 Q4.9 Q1.1 Q2.1 Q3.1 Q4.1 29 21 211 R/$ 9.91 8.45 7.8 7.6 7.4 7.95 8.25 7.9 8.44 7.88 8.2 R/GBP 14.21 12.93 12.79 12.54 12.19 13.19 13.93 13.48 12.99 13.19 12.84 R/Euro 12.93 11.4 1.8 1.64 1.36 11.21 11.84 11.46 11.47 11.21 11.76 Yen/R 9.45 11.47 12.5 13.49 14.19 13.52 13.33 14.24 11.57 13.81 13.41 $/GBP 1.43 1.53 1.64 1.65 1.65 1.66 1.69 1.71 1.54 1.68 1.57 $/Euro 1.3 1.35 1.39 1.4 1.4 1.41 1.44 1.45 1.36 1.42 1.43 Yen/$ 93.7 96.9 97.5 12.5 15. 17.5 11. 112.5 97.64 18.75 11 2
21 Inflation
food price inflation at the retail level has begun moderating lagging the trend in PPI food 4 % y/y 3 2 1-1 -2 Jan- May-1 Sep-2 Jan-4 May-5 Sep-6 Jan-8 May-9 22 CPI Food Inflation PPI Agricultural Food
...retail food price inflation should moderate further due to the rand s strength.. % y/y 13 23 3 24 18 12 6 Jan- Jan-3 Jan-6 Jan-9 CPI Food Inflation USDZAR 12 11 1 9 8 7 6 5
deflation likely this year at the producer level, and approaching the lower limit of the inflation target range for retailers by early 21 22 % y/y 18 14 1 6 Target range (3-6%) 2-2 24-6 Jan-8 Jan-9 Jan- Jan-1 CPI PPI
..risks to the outlook are tilted more to the downside but oil prices remain a risk $ 15 13 11 9 7 5 3 27 28 29 Brent Crude Oil 25
Inflation and interest rate forecasts Q1.9 Q2.9 Q3.9 Q4.9 Q1.1 Q2.1 Q3.1 Q4.1 29 21 211 CPI inflation 8.4 7.6 6. 5.3 5. 4.8 4.1 4.3 4.8 4.6 6.9 PPI inflation 7.2 -.4-5. -3.2 -.4 2.2 3.8 6.2 1.3 -.6 3. Prime 13. 1.5 1.5 1. 1. 1. 1. 1. 1. 11. 26
27 Economic Growth
we expect a 1.2% qqsaa contraction in Q3.9 (Q2.9 recorded -3.%, Q1.9-6.4%) 15 % 1 5-5 -1 196 1965 197 1975 198 1985 199 1995 2 25 21 3 25 2 15 1 5-5 -1-15 -2-25 -3 SA GDP qqsaa Leading Indicator qqa 28
all major sectors contracted in Q2.9 % qqsaa Manufacturing 14 9 4-1 -6-11 -16-21 -26 Mar-95 Mar-97 Mar-99 Mar-1 Mar-3 Mar-5 Mar-7 Mar-9 % qqsaa Retail & Wholesale Trade 13 1 7 4 1-2 -5-8 Mar-95 Mar-97 Mar-99 Mar-1 Mar-3 Mar-5 Mar-7 Mar-9 29 Finance, real estate & business services % qqsaa 14 12 1 8 6 4 2-2 -4-6 Mar-95 Mar-97 Mar-99 Mar-1 Mar-3 Mar-5 Mar-7 Mar-9
manufacturing sector affected by weak external demand for SA exports % y/y Asia % y/y Europe 9 7 5 3 1-1 -3-5 Jan- Jan-2 Jan-4 Jan-6 Jan-8 55 35 15-5 -25-45 Jan- Jan-2 Jan-4 Jan-6 Jan-8 % y/y 1 Africa 8 6 4 2 3-2 Jan- Jan-2 Jan-4 Jan-6 Jan-8
...retail, wholesale and finance sectors affected by slowdown in credit demand and low consumer confidence.. % y/y 3 Total Credit Demand % y/y 3 Consumer Credit Demand 25 25 2 2 15 15 1 1 5 5 Jan- Jan-2 Jan-4 Jan-6 Jan-8 Jan- Jan-2 Jan-4 Jan-6 Jan-8 % y/y Consumer Confidence 2 1-1 31-2 Jun- Jun-2 Jun-4 Jun-6 Jun-8
thousands as a result 475 jobs have been lost so far this year and more to follow. -1-5 -9 Agriculture Mining Manufacturing Utilities Construction Trade Transport Finance Comm/social serv Private h/hlds -13-17 -21 Year to Date 32
domestic consumption? % qqsaa 1 8 6 Consumption by households 4 3 2 Spending on Durable goods 4 1 33 2-2 -4-6 Mar- Mar-2 Mar-4 Mar-6 Mar-8 Spending on semi-durable 3 2 1-1 Mar- Mar-2 Mar-4 Mar-6 Mar-8-1 -2-3 Mar- Mar-2 Mar-4 Mar-6 Mar-8 Spending on non-durable 9 6 3-3 -6-9 -12-15 Mar- Mar-2 Mar-4 Mar-6 Mar-8
.debt levels still high, while disposable income is falling 8 75 7 65 % Household debt % of disposable income 1 8 6 4 2 % Disposable income 6 55-2 5 45 Mar- Mar-2 Mar-4 Mar-6 Mar-8-4 -6 Mar- Mar-2 Mar-4 Mar-6 Mar-8 1.5 % Savings % of Disposable income 1.5 -.5 34-1 Mar- Mar-2 Mar-4 Mar-6 Mar-8
35.so where to from here?
.for SA to grow we must invest in fixed assets.. % 5 4 3 2 1 21 22 23 24 25 26 27 28 South Af rica India Ireland Indonesia Thailand Chile China 36
.SA is moving in the right direction, although slowly.. % 26 24 22 2 18 16 14 2 21 22 23 24 25 26 27 28 29 Gross Fixed capital formation % of GDP 37
SA s leading indicator has risen for three successive months, could be signaling a turning point. Index 13 12 11 1 9 8 7 6 5 4 3 196 1967 1974 1981 1988 1995 22 29 Business Cycle Phases (blue downward phase) Leading Indicator 38
Similarly, the US recorded a less than expected contraction in Q2.9 and is likely to record GDP growth in Q3.9 (SA lags the US by one quarter)... % qqsaa 1 5-5 39-1 198 1984 1988 1992 1996 2 24 28 SA GDP US GDP
we believe the worst of the current recession is over but remain cautiously optimistic about the recovery path. 15 1 5-5 % 3 2 1-1 -2-1 196 1965 197 1975 198 1985 199 1995 2 25 21-3 SA GDP qqsaa Leading Indicator qqa 4
despite seeds of hope for SA: the PMI is indicating a less rapid contraction in the manufacturing sector in 6 months time 9 8 7 6 5 4 3 Index % year/year 15 1 5-5 -1-15 2 1999 22 24 26 29-2 PMI - Exected Business Confidence Manufacturing 41
PMI new sales orders & inventories 1.5 1.3 1.1 Ratio Indices 7 6 5.9 4.7 3 42.5 25 26 27 28 29 New sales orders to inventories ratio New sales orders Invento ries 2
SA s key forecasts to Q1.1 Household Consumption Expenditure Q3.9 Q4.9 Q1.1 GDP (qqsaa, %) -1.2.2 2.4 HCE (qqsaa, %) -1.1.7 2 GCE (qqsaa, %) 4.1 3.9 4.4 GFCF (qqsaa, %) -4.4-3 2.6 Real change in Inventories (R bn) -6.2 1.2 1.2 GFCF as a % GDP 23 22 GDE (qqsaa, %) 4.7 2.7 2.6 Exports (goods & non-factor services) - (qqsaa, %) 6.3.5-1 Imports (goods & non-factor services) - (qqsaa, %) 14.9 8.3-5.9 Balance: Current Account (saa) - R bn -133.4-156.8-164.5 Balance: Current Account (saa) - % GDP -5.4-6.3-6.6 43
Factors supporting another interest rate cut this year Latest Previous Supportive Unemployment 23.5 21.9 Yes 44 TEI - leading indicator for retail sales Below 5 Below 5 & falling Yes PMI Below 5 Below 5 & falling Yes PMI Inventories Below 5 Below 5 & falling Yes PMI New Sales Orders Below 5 Below 5 & falling Yes RMB/BER Business Confidence Index Below 5 & falling Below 5 & falling Yes FNB/BER Composite Building Confidence Index Below 5 & falling Below 5 & falling Yes PSCE 6. 7.6 Yes PPI Inflation -4.1-3.1 Yes Growth -3. -6.4 Yes CPI Inflation 6.9 8.5 Expected to be in target in Q4.9 CPI Inflation - December 5.5 Yes
45 Fiscal Policy
Personal Income tax Personal income tax Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Year Percentage 1998 537 548 5661 5421 623 7452 6616 5928 6815 7186 6951 8619 77594 1999 5127 6561 655 6675 7149 857 781 6422 7667 7646 7754 9692 85884 1.68 2 598 583 6453 6646 767 7711 7856 6531 7495 7775 863 863 86478.69 21 6183 6786 6488 6112 7245 8212 7776 662 8141 7493 9 1334 939 4.52 22 6724 6298 6845 6654 7393 8451 8134 73 8488 8435 858 1136 94337 4.37 23 7184 7229 696 712 795 9361 8239 7383 8487 983 927 1247 98495 4.41 24 8161 889 861 8231 9469 1166 9256 8552 9745 1476 1246 1528 11982 12.68 25 9625 9565 94 929 1485 1134 1317 9616 11341 11238 1971 12889 125645 13.21 26 9952 9969 1139 1354 11671 13145 11278 1117 12747 12346 13113 14848 14578 11.89 27 11469 11979 1216 13168 14916 15965 14116 12457 14421 15151 15827 1733 168788 2.7 28 1419 13736 13919 15667 17382 18721 1676 14141 16964 16933 18333 18423 195115 15.6 29/1 15538 14817 15124 1723 17887 18265 16299 14796 1655 1642 18277 18367 199364 2.18 17.98 18. 8.68.4 2 18 16 21 22 14 12 1 8 6 23 24 25 26 46 4 2 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 27 28 29/1
Company Tax Company tax Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Year Percentage 1998 651 37 1787 3117 142 989 3198 217 394 18 11 3975 2311 1999 455 169 298 33 267 1734 35 162 3334 1849 898 353 2972-8.86 2 769-27 3629 348 483 1946 3245 513 437 3422 151 7285 29492 4.63 21 1145 353 9746 34 438 3586 5866 683 8955 1769 191 4872 42354 43.61 22 1362 16 13511 33 2859 6119 2531 1821 13598 553 2436 6324 55745 31.62 23 493 383 16834 2334 3531 8212 2728 121 13118 1444 2926 7857 6881 9.21 24 55 787 13657 2327 2767 157 2916 85 16857 1984 522 12387 7782 16.26 25 816 775 18279 2317 3274 1351 2841 235 18882 3352 5124 14955 86161 21.73 26 511 1258 23893 377 558 194 4188 268 24822 39 7887 23477 118999 38.11 27 751 1389 28847 3579 599 2418 6615 2241 3361 2761 9983 23931 1416 17.74 28 1337 133 36539 5 9853 2138 5563 1861 4685 33 14358 24198 165378 18.4 29 1346 1246 31157 4263 92 19533 582 17 3717 315 13117 2218 148741-1.6 2.76 26.44-13.86-8.88 t 45 4 35 3 25 2 15 1 5 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 21 22 23 24 25 26 27 28 29 47
Value Added Tax VAT Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Year Percentage 1998 312 3851 389 3584 3359 365 356 4496 3227 488 2548 515 43677 1999 294 3739 283 4463 3224 563 4247 414 4516 4373 3633 4857 48377 1.76 2 3755 4786 328 4959 4426 4433 3952 4921 4681 5442 385 614 54455 12.56 21 3143 518 4468 43 5829 525 4681 5963 4971 7469 4831 5494 6157 12.12 22 5327 5273 5683 5479 596 6759 5528 5947 5621 6472 5769 7196 715 14.89 23 5229 6654 531 71 7423 4486 7529 7286 6278 8219 6322 8953 8682 15.1 24 6434 771 7879 7737 7387 7862 8174 8313 8768 9447 665 12437 98158 21.66 25 5624 9242 8591 124 7993 9275 9663 1382 9765 11197 859 1397 114352 16.5 26 762 1131 1596 1145 1989 11488 1853 11941 11177 13568 1117 13886 134463 17.59 27 9765 12 166 11715 1198 12447 12392 14328 1336 13272 11533 18252 15443 11.88 28 8816 1279 12645 1353 1929 1391 1795 14569 1179 14565 9577 21351 15434 2.59 29 648 888 983 1699 866 11373 9378 12657 1243 12654 832 17549 125113-18.94 24 14.19 5.56-31. -15.51 21 18 15 12 9 6 21 22 23 24 25 26 27 28 29 3 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 48
Total Tax Revenue Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Year Percentage 1998 157 12789 13463 16233 13368 15533 17622 13569 17891 15776 14753 21662 183166 1999 132 143 14991 1675 1514 19628 1676 1543 269 1595 1565 24138 198494 8.4 2 1225 1536 17515 16776 15962 1897 1796 16734 294 19157 1681 27573 215592 8.6 21 12441 17773 22784 18682 1882 22635 2264 19118 26864 19919 19894 2717 24811 15.1 22 16647 2227 29816 19587 19993 27512 2477 282 33585 1919 2599 363 278885 12.4 23 1553 19597 33577 2813 2479 27565 22647 21681 3344 22158 23632 34178 29887 7.2 24 17812 22294 35314 21558 2528 35829 23731 25559 41584 25878 28416 4435 347352 16.2 25 2781 26692 4273 27353 29241 43448 27224 31517 47263 29859 3219 5338 411164 18.4 26 21412 317 52916 2931 37218 52858 378 34997 5843 32445 41618 59282 48121 17. 27 2653 34255 656 32577 41913 6133 36855 4542 7791 37184 4782 71163 559774 16.3 28 27196 36733 71946 38236 47458 6387 36356 41264 8832 35922 51937 766 68348 8.7 29 2431 32435 65575 3495 43748 58876 33513 3838 74513 33113 47876 7611 55755-8.4 15.78 12.47-9.98-7.88 Total Revenue 9 8 7 6 5 4 3 2 22 23 24 25 26 27 28 29 1 49 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Total Expenditure Total Expenditure Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Year Percentage 1998 19123 14662 16743 141 21583 16554 15634 15241 16743 14695 22573 16473 2428 1999 2347 16346 1637 15373 23688 1784 14859 1587 17832 15348 23426 1919 21645 6.1 2 21144 163 18338 16515 2455 1964 1758 16217 18734 179 26632 22725 233944 8.1 21 2867 2681 19541 1836 29775 19794 18993 1871 18965 1873 3856 28354 26295 12.4 22 23997 23458 2827 21897 32136 21264 21216 21124 2983 2427 32678 27741 291529 1.9 23 26288 23724 2386 25474 3618 26913 24922 23643 2557 22877 38435 3159 328744 12.8 24 26554 3823 2897 26625 4349 2835 26271 27454 29621 25761 4819 37878 36863 12.1 25 31487 3321 32976 2896 43578 34299 26841 3211 37423 28449 4296 48118 416784 13.1 26 32749 36755 3894 3883 43154 3837 347 4392 38768 35611 51877 41889 47163 12.8 27 44775 4758 4175 4726 4627 42999 42485 45112 42976 41123 59314 48251 416784 13.1 28 4161 48213 46651 57159 53281 54992 582 51823 62219 485 639 61357 635647 52.5 29 61667 52329 6652 8931 75439 77862 791 73375 8794 5789 61985 5363 818597 28.8 16.83 8.13 32.46 27.78 1 9 8 7 6 5 4 3 2 1 21 22 23 24 25 26 27 28 29 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar 5
51 Budget Deficit
Summary Global economy approaching stability although not uniform Most of this due to government intervention and inventories SA s recovery will lag trading partner countries and is expected to be slow PPI and CPI are expected to continue on their down path Interest Rates The rand is still seen remain at current levels but could reverse Budget deficit likely to be around 8% of GDP 52