The October 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 Reuters Econometer fell for a third consecutive month in October, falling to 235,60, its lowest level since September last year. Confidence in SA’s economy fell as demand and manufacturing capacity is seen taking longer to improve, as a result of the looming increase in power tariffs, which is expected to further restrain growth and fuel inflation. GDP forecasts have been further downgraded in the October survey, on expectation that the recovery won’t be a smooth process and it will take time for confidence to build up. With Eskom pushing for an increase in electricity prices of 45% over the next three years, a prospect the central bank said is the main upside risk to long-term inflation. Compared with September’s survey, inflation is now expected to be higher, averaging 5,79% next year and 5, 85% in 2011. The rand is now seen weakening slightly next year, compared to Septembers survey. The National Treasury and the central bank have expressed their concern about the strength of the ZAR currency and its impact on the broader economy.

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Source: Sudheer Singh, Sasfin Securities, November 4, 2009.

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