1 / 29

South African Economic Indicators November 2011

South African Economic Indicators November 2011. Market Overview. Index. Economic Growth (GDP) 3 Exchange Rate 5 Input Prices 7 Inflation 13 Interest Rates 18 Employment 20 Household Debt 22 Consumer Confidence 24 Retail Sales 26. Market Overview. Boom period. Economic Growth (GDP).

cleary
Télécharger la présentation

South African Economic Indicators November 2011

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. South African Economic Indicators November 2011

  2. Market Overview Index Economic Growth (GDP)3 Exchange Rate5 Input Prices7 Inflation13 Interest Rates18 Employment20 Household Debt22 Consumer Confidence24 Retail Sales26

  3. Market Overview Boom period Economic Growth (GDP) Double dip? Fig 1: GDP Growth Updated 01 December 2011 2008/2009 Recession Period of recovery Source: StatsSA

  4. Market Overview Economic Growth (GDP) • COMMENTARY • GDP ticked up slightly from 1.3% in Q2 of 2011 to 1.4% in Q3 2011, coming in at lower than expected • Growth forecasts for the rest of the year have been revised downward even further to 3.0%, and in some cases even lower • The persistent climate of stagflation currently being experienced in South Africa means the country is slipping closer and closer to a point where activity could border on a recession, leading many analysts to believe there is a good chance of a rate cut being announced as early as January 2012. While an interest rate cut would stimulate activity, it will not however represent a quick fix for the economy – demand in exports is coming down due to problems in the Euro zone (South Africa’s biggest trading partner), unemployment remains high as does inflation, all factors contributing towards a shaky outlook.

  5. Market Overview Fig 1: Exchange Rate Updated 01 December 2011 Exchange Rate 2008/2009 Recession & election uncertainty Rand fallout Euro debt crisis Euro officially launched Source: StatsSA

  6. Market Overview Exchange Rate • COMMENTARY • The rand (along with other emerging market currencies) continues to weaken against all majors, reaching its lowest level in two and a half years against the US$ in late November • The rand has depreciated by about 20% against the dollar, the euro and the pound so far this year • This has the dual effect of keeping exports cheaper, but at the same time pushing inflation higher • South Africans have been labeled as quite “schizophrenic” regarding their reaction to the rand. When it is strong, there are calls to weaken it in order to make exports cheaper, and when it is weak, we are dissatisfied because it puts pressure on inflation. Unfortunately, local policy makers have little control over the fate of the rand. It will wax and wane with the global environment. According to RMB, the trouble is not so much the level of the rand, but its volatility. In 2011 it fluctuated between R6,56/$1 and R8,58/$1, making international trade and long-term investment decisions more difficult to make, hurting business sentiment.

  7. Market Overview Fig 1: Oilseed Market Trends Updated 01 December 2011 Input Prices: Oilseed Prices drop due to larger than expected supplies in international markets Prices rise due to cut in US supply forecast Source: FNB

  8. Market Overview Fig 2: Cereal Market Trends Updated 01 December 2011 Input Prices: Cereals (Maize, Wheat) Prices of yellow maize & white maize increased by ± 28% and 35% during 2011 Surplus of grains in international markets knocks prices Source: FNB

  9. Market Overview Fig 3: Beef and Poultry Market Trends Updated 01 December 2011 Input Prices: Beef & Poultry Prices rise due to increase in prices at producer level Source: FNB

  10. Market Overview Fig 4: Vegetable Market Trends Updated 01 December 2011 Input Prices: Vegetables Supplies decrease due to black frost in central and northern regions, pushing up prices Prices dip due to increase in volumes Vegetable prices have historically been subject to volatility Source: FNB

  11. Market Overview Decline in oil reserves, Middle East tension & oil price speculation Fig 5: Fuel Market Trends – Petrol, Diesel, Paraffin Updated 01 December 2011 Input Prices: Fuel Fuel price increase due to weak rand Demand for energy drops due to recession Unrest in African oil producing countries Source: FNB

  12. Market Overview Input Prices • COMMENTARY • Electricity prices continue to impact businesses and consumers • Vegetable prices experienced a dip across the board, with the prices of tomatoes, potatoes, carrots and cabbage decreasing • Maize prices saw a slight drop in November • According to the United Nations, food prices have doubled over the past five years indicating that the trend is an rising one. In the short-term, food inflation has mainly been attributed to the rise in the price of maize, and it is believed that the full effect of the maize price has not yet filtered down completely to influence meat and dairy prices due to production cycles.

  13. Market Overview 2008/2009 Recession Fig 1: CPI, CPIX and Food Inflation Updated 01 December 2011 Inflation Fuel, electricity & food price increases Effects of lower demand Source: StatsSA

  14. Market Overview Fig 1: CPI for Food, Personal Care, Alcoholic Beverages and Electricity and other Fuels Updated 01 December 2011 Inflation Fuel and electricity price hikes push food prices up Alcoholic beverage prices remain stable Source: StatsSA

  15. Market Overview Fig 1: CPI by Food Type Updated 01 December 2011 Inflation: CPI by Food Type Most food groups are experiencing inflation well above CPI levels of 6% Source: StatsSA

  16. Market Overview Fig 1: CPI by Province Updated 01 December 2011 Inflation: CPI by Province Only Gauteng and the Western Cape are experiencing inflation below CPI levels Source: StatsSA

  17. Market Overview Inflation • COMMENTARY • CPI increased from 5.7% in September to 6% in October, its highest level since January 2010 • PPI increased from 10.5% to 10.6% • Food and non-alcoholic beverages inflation increased from 8.5% to 10.6% in October, its highest level since May 2009 • The Reserve Bank expects inflation to peak at about 6,3% in the first quarter of 2012 before declining gradually and returning to within the target range in the final quarter • October saw CPI reaching the Central Bank’s upper target of 6%. Analysts were of the opinion that the Bank may therefore start toying with the idea of cutting interest rates to boost the economy. Higher food and fuel costs have been driving the rise in prices, coupled with a rand exchange rate that has weakened close to 30% against the dollar this year. However Reserve Bank Governor Gill Marcus commented that“in the current climate we think we should watch (the breach) rather than respond to it”. It is therefore likely that the Reserve Bank will continue with its “wait and see approach” and consumers will have to deal with higher prices for a little while longer. • NOTE: In January 2009, the official measure of inflation in South Africa switched from the CPIX, based on a basket of goods and services excluding bond repayments, to the CPI, which includes bond repayments, and is based on a basket which has been reweighted to be more representative of what the average South African household is spending its money on.

  18. Market Overview SARB takes aggressive steps to fight inflation Fig 1: Prime Lending Rate Updated 01 December 2011 Interest Rates 2008/2009 Recession SARB adopts ‘wait & see’ approach Source: South African Reserve Bank

  19. Market Overview Interest Rates • COMMENTARY • The prime lending rate remains at 9% as the Reserve Bank decided to leave the repo rate unchanged at 5.5% • This is the lowest level since 1974 • The prime interest rate is expected to stay unchanged at 9% until late next year due to global economic concerns and slow growth. This low interest rate environment has led to households reducing their debt to disposable income ratio from more than 81% three years ago to 75.9% in the second quarter of 2011. This means the cost of servicing debt as a percentage of disposable income of households also declined, leaving South African consumers with more disposable income. However, despite this positive shift, debt levels are still extremely high and this, coupled with high food and fuel prices will probably cause consumers to buy more non-durables, like food and clothing this Christmas, say analysts. While this is good news for South Africa’s major food retailers, it does mean that sales of higher margin goods such as general merchandise will probably be muted.

  20. Market Overview Fig 1: Key Labour Market Components Updated 09 November 2011 Employment Effects of recession felt Expanded Public Works Programme introduced Source: StatsSA

  21. Market Overview Employment • COMMENTARY • The official unemployment rate went down from 25.7% to 25% in the third quarter of 2011 • Restrictive labour laws and a lack of skills among the youth are two of the major problems currently facing the labour market today • The number of persons in the labour force increased by 98,000 between Q2 2011 and Q3 2011 and formal sector employment increased by 238,000 jobs, while informal sector employment decreased by 53,000 jobs. • It is hoped that the much discussed Youth Wage Subsidy will be implemented as planned on 1 April 2012, reducing chronic youth unemployment, aiding businesses which are struggling with high wage costs and increasing consumer spending. According to StatsSA, more than 72% of the officially unemployed population is younger than 34. • Low levels of employment means fewer breadwinners in South African families and therefore lower disposable income. It is hoped though, that the country can build on the small improvement of the last quarter.

  22. Market Overview Fig 1: Percentage of Disposable Household Income Devoted to Debt Repayment Updated 09 November 2011 Household Debt Effects of low interest rates Boom period Source: South African Reserve Bank

  23. Market Overview Household Debt • COMMENTARY • Household debt dropped to 75.9% (Q2, 2011), meaning that for every R100 earned, households have R75.90 debt • The level was described by Reserve Bank chief economist, Monde Mnyande as “relatively elevated” • Q2 also showed a rise in YOY disposable income growth from 8.9% (Q1) to 9.9% • Though the debt situation improved slightly in the second quarter, consumers are still experiencing high levels of financial vulnerability regarding debt. This is shown by the percentage of consumers with impaired records increasing from 46.4% (Q1) to 46.7% (Q2). Some analysts are of the opinion that although the ratio of household debt to disposable income is declining, this is taking place too slowly and as long as it remains relatively high, South Africans will continue to be in a vulnerable position and economic growth under threat.

  24. Market Overview Boom period – High levels of GDP growth Fig 1: Consumer Confidence Index Updated 01 December 2011 Consumer Confidence 2008/2009 Recession Period of recovery Source: Bureau for Economic Research

  25. Market Overview Consumer Confidence • COMMENTARY • Consumer confidence increased by 1 index point in Q4 of 2011 to +5 (from +4 in Q3 of 2011) • Consumer confidence increased due to a slightly higher percentage of consumers expecting an improvement in their household finances and a slightly lower percentage rating the present as the wrong time to buy durable goods relative to Q3 of 2011 • However, these increases were partially countered by a decline in the percentage of consumers that expect the economic situation in South Africa to improve over the next 12 months • In Q4 of 2011 consumers became even more pessimistic about the economy, but slightly more optimistic about their own finances. Consumer confidence remains above average though, supportive of consumer spending. This means that consumers will spend the bulk of any increases in real disposable income going forward. However, accelerating inflation will likely dent the growth in real disposable income over the short term, which will probably lead to lower growth in consumer spending given the limited access to bank credit.

  26. Market Overview Fig 1: Retail Trade Sales (R’m) Updated 01 December 2011 Retail Sales Spikes indicate festive season sales peaks Source: South African Reserve Bank

  27. Market Overview Positive retail environment despite economic uncertainty Fig 2: Retail Trade Sales (R’m) – Trended Updated 01 December 2011 Retail Sales: Trended Effects of 2008/2009 Recession felt Boom period Source: StatsSA. Measure: Economic activity in the retail trade based on a sample of income tax registered private & public enterprises (incl VAT). Consists of food, beverages & tobacco (largest contributor ± 35%), pharmaceutical & medical goods, cosmetics, toiletries, household furniture, appliances, articles & equipment, repair of personal & household goods, hardware, paints & glass, textiles, clothing, footwear & leather goods.

  28. Market Overview Retail Sales • COMMENTARY • Retail sales growth for September unexpectedly accelerated to 8.3% compared to September 2010, when the market had expected growth of 6.4% • The highest growth rate was recorded by retailers in hardware, paint and glass while retailers of food, beverages and tobacco in specialised stores experienced a 0% YOY increase in retail sales for the month • Analysts believe that this level of growth is unsustainable and must be considered in light of the soccer World Cup last year, which had caused a spike then created a lower base for the current results. It is however an indication that the low interest rates, slightly improved employment levels and high nominal income levels are supporting some South African consumers, although food retailers seem to be suffering from high food inflation levels globally. With household debt still so high, consumers are expected to spend cautiously this festive season.

  29. Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence For further information: +27 (0)31 303 2803 / info@tradeintelligence.co.za Other Sources ABSA Agri Trends; BizCommunity; Bloomberg; Business Day; Business Report; Department of Agriculture, Forestry and Fisheries; Financial Mail; Finweek; Fin 24; The Mercury; Reuters; Sunday Times; Sunday Tribune; The Times ; www.businesslive.co.za; www.businessweek.com; www.moneyweb.co.za; www.supermarket.co.za

More Related