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In this short note, Cees Bruggemans takes a look at the South Africa economic data that’s come out in September. The most glaring aspect is that it’s mixed at best, wherever there’s a bright spot, so follows a dark one, and vice versa. An interesting read that’ll have your economic emotions running both hot and cold. – Stuart Lowman
by Cees Bruggemans*
It has been a funny month so far, and only one-third gone. A mix of data either passable to good or poor to horrible. It defies easy description or pigeonholing, though the mood is uniformly foul.
It started with a third monthly cut in petrol and diesel prices, another big one. That good news, however, has now already been overtaken by adverse Rand moves that keep the slate barely in over-recovery for petrol (2c/l) but already deep into under-recovery for diesel (47c/l). Here come the next price increases (October).
Eskom may point to 40 days free-of-load-shedding by now, but the July output data for electricity generation released last week borders on the horrific. Some 3.3% down yoy, but the graph accelerating down as if entering deep recession (with the 2008 profile as guide).
Motor vehicle sales offer a similar picture. Over 8% down yoy in July and August, but with one bank representative offering the view that this decline could still accelerate in coming months/quarters. The motor trade is clearly not the happy quarter at present.
Yet in property not everything can be doom and gloom if transfer duty collections are rising the way they are. Immediately negated by the fact that duties on excess value over R2.25 million were raised from 8% to 11% last March. And with a few too many really expensive houses passing hands, transfer duty collections are bound to jump. Sure, except when adjusted for such tax rate changes, they are still showing smart upside. The property recovery seems to be broader based rather than narrow in number of transactions and prices fetched.
If you are an exporter (or recipient of foreign-earned dividends), your grin may be so wide it hurts. That’s the flip side of the Rand fall of recent years. Very high Rand export prices (and select Rand dividends, depending on company fortunes).
Wednesday was bad, with the RMB/BER business confidence index for 3Q15 dropping to 38 (43), confirming that more than 6-out-of-10 business managers are now deeply morose. Political climate as restraint on business conditions is now at its highest level ever, with 6-out-of-7 executives saying so. No wonder they are migrating their businesses increasingly to friendlier climes.
Yesterday, mining and manufacturing added to this happy picture by ticking up in July, mining by 1.1% and manufacturing by 0.3% from June (both +5.6% yoy).
True, mining was still off a strike-depressed base for platinum (PGMs +71%) and diamonds (+10%). But far less encouraging, coal -2%, gold -7.4%, iron ore -8%. That was mixed at best and hardly impressive off a five month strike for PGMs.
Manufacturing was a similar mixed bag. Motor industry +40% (mostly all export, off a depressed retooling base), basic steel and other metal working +16% (after months of steep dropping and now partly clawing back under the influence of aggressive Chinese import penetration and electricity shortages), yet our oil refining -16% (yet another refinery offline for maintenance), and food (with a big manufacturing footprint, 15% of total) doing only +0.4%.
And throughout these two weeks the JSE stock exchange swung wildly, staying between 10%-15% below its April all-time peak, some days falling deeply, on other days happily reviving, wild mood swings alternating. A clear sign nobody knows which horse to bet on. And the Rand falling to half its value of 2011 (14:$ now versus 7:$ then).
So, count your blessings, but pass the ammunition.
*Cees Bruggemans, chairperson, Bruggemans and Associates, Consulting Economists
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