The May 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%.
Afterreachinga2-yearhighinMarch,theEconometerhasfallenineachofthepasttwomonths.The lingering weakness in the economy and concerns that the decline in inflation has not been as rapid as previously expected has resulted in the May Econometer falling further to 251,97.
With the confirmation of economic recession coming with the release ofQ1GDPgrowthdatasincetheAprilEconometerwaspublished,growthforecastshavenowbeenrevisedfurther downwards. The economy is now seen contracting by 1,42% over 2009, a more bearish outlook than that published in April’s survey which saw a 0,5% contraction for 2009.
Sticky consumer inflation has caused the other major revision to expectations with CPI inflation now seen averaging above 7% for the year, before dipping into the top end of the target band mid-way through 2010. This is a material change to the April outlook which saw consumer inflation falling into the target range by Q3 2009. Eskom tarriff increases and higher spot oil prices will also contribute to stubborn consumer prices so a further upward revision in the June survey is not out of the question.
The local currency has been in the headlines over the past few weeks. After reaching a recent high of R7,87/$ in early June, the rand is now seen stabilizing in a range of R8,50/$ to R8,70/$ in the medium term and is expected to average R8,59/$ for the year before trending weaker throughout the balance of the forecast period.
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Source: Sasfin, May 2009.
