Economic and market snapshot for September 2018
In Momentum Investments’ view, an acceleration in structural reforms is imperative to resolve the country’s stark inequality problem.
SA equities ended lower in May 2018, tracking weaker global equity markets and following bleak corporate earnings reports.
Despite little revision to the SARB’s inflation projections, a resuscitation in inflation risks informed the MPC’s decision to leave interest rates unchanged at 6.5% at the May 2018 rate-setting meeting.
The South African Reserve Bank (SARB) noted a reversal in the long upward trend in underlying inflation in its April 2018 Monetary Policy Review.
In its recently released April 2018 Financial Stability Review, the SARB concluded that SA’s financial sector is strong and stable and continues to feed off positive business and consumer sentiment, in spite of global uncertainties, monetary policy normalisation and protectionist measures.
The Bureau of Economic Research’s Consumer Confidence Index surprised at a record high (since the survey’s inception in 1982) of 26 points for the first quarter of 2018, rising from a negative 8 point reading in the previous quarter.
With the ‘Ramaphoria’ effect continuing to underpin positive consumer, business and investor sentiment, it is not a surprise that SA’s leading economic growth indicators are pointing upwards.
Early in the month, South African equities benefited from the GDP report (fourth quarter of 2017), suggesting the economy performed better than initial market expectations. The local equity market struggled to find direction during the first half of the month, but ended March 2018 decisively weaker (negative 4.2%).
The South African Reserve Bank Monetary Policy Committee noted macro risks have abated since the January 2018 meeting, allowing for a 25 basis point cut in interest rates to 6.5%.
Broad-based inflation reprieve remains prominent in South Africa’s consumer basket, price increases for more than 80% of the items in the basket came in below the 6% upper end of the inflation target band.
Moody’s kept South Africa’s (SA) foreign and local currency rating unchanged at Baa3, in line with expectations, which left the country eligible for inclusion in the Citigroup World Government Bond Index (Citi WGBI).