Business news

2016-07-07 06:00

The good

ACCORDING to Statistics SA, producer price inflation slowed to 6.5% year on year in May from 7% in April. Market expectations were that the PPI would come in at around 6.9%.

The main contributors to the annual rate of 6.5% were food products, beverages and tobacco products.

The moderation in PPI inflation and the recent slowdown in consumer price inflation to 6% could see the SA Reserve bank holding interest rates at the next monetary policy meeting in July.

With the SA economy facing significant risk of slipping into recession this year, maintenance of interest rates may just tip the scale in favour of avoiding negative growth.

Meanwhile, the SA Revenue Service reported a surge in the trade surplus for May to R18.7 billion.

This represents the biggest surplus since 1996 resulting in the Rand rebounding against the U.S. dollar and
other international currencies.

Exports increased by 14% to R104.7 billion while imports decreased to R86 billion.

The trade surplus continues to improve the country’s trade balance which in turn narrows the deficit on the current account which reached unacceptably high levels of around 5% of GDP earlier this year.

The current account balance is
an indication of the level of liquidity
in the economy and is one of the
indicators looked at by international investors.

The bad

Earlier this week Statistics SA announced that a further 15 000 jobs were lost during the first quarter of this year. The sectors most impacted were retail, hospitality, manufacturing, transport and mining.

Between June 2013 and March this year the mining sector alone had shed 60 000 jobs.

According to several analysts employment prospects are unlikely to improve this year due to reduced economic growth forecasts.

The South African Reserve Bank has revised growth projections from 0.9% to 0.6% this year.

The World Bank and the International Monetary Fund have also projected growth of less than one percent.

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