The June edition of the Reuters South African Survey of Economists has just been published. (The Reuters Econometer is a measure of economic sentiment drawn from a monthly poll of forecasts by leading economists in South Africa and abroad and presented in the form an index). The weightings used in the index are: GDP growth – 25%; CPIX inflation – 20%; Producer Price Inflation – 5%; Prime Interest Rate – 20%; 10-year bond yield – 5%; Rand-Dollar Depreciation – 25%.
The June Econometer fell to a 9-month low on expectations the economy will contract faster than previously expected and the central bank may have reached the end of its interest rate cuts. June’s survey has shown that the economy is expected to contract more than previously expected. Contributing to the further contraction was the economy falling into a recession for the first time in 17 years.
Inflation is still expected to fall within the target band by Q2 2010, however it still remains sticky and above the target even tough it has slowed. CPI is now seen averaging 7,33% this year compared to 7,05% seen in the May Econometer. The electricity hike announced recently has contributed to pushing forecasts up.
June’s Econometer has shown expectations for further interest rate cuts have tempered. It is expected that interest rates will remain at current levels for some time to come. In a recent statement, the central bank said international oil prices was one of the main risks to the inflation outlook, how ever the rand’s strength was a favourable factor. The rand has gained about 13% against the dollar since the beginning of this year, expectation is for the rand to average R8,53/$ at the end of this year and R5,70/$ by the end of 2010.
Please click the thumbnail below for the full report.
Source: Sasfin, June 2009.
