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Short Notes

Short Note                                                                                   12 August 2016

SA growth: fighting back   

by Cees Bruggemans          words 400

It may defy every day impressions (you mean we are not in recession with new car sales -20% yoy, RMB/BER business confidence showing 2-out-3 business managers morose, and SARB leading indicator still diving?), but yes, we aren't in recession. And this flavour may well linger.

Mining and manufacturing data for June yesterday completed their 2Q tallies – and production is up, not down. The story will repeat itself in other, mainly services sectors, with farming the only real (drought) dog still. This picture should not change materially in 3Q & 4Q, with the Barclays PMI trend line (manufacturing) well ahead of 50, as the Standard Bank one (for the broader economy) hugs 50.

Short Note                                                                                   10 August 2016

A rampant Rand   

by Cees Bruggemans          words 780

It is only six months ago, when participating in a major corporate forum, where a business client took the view that the Rand (16.50:$ at the time) could “only” weaken further. And never come back….He was admittedly speaking to his book, though not necessarily realising it.

Things at the time admittedly looked dire. A Rand disaster scenario was a natural view to take, perhaps, following very precarious years and many major events. Except that Rand overshooting to either side of fair value has a way of correcting in time.

Short Note                                                                                      6 August 2016

South Africa votes   

by Cees Bruggemans          words 750

Compared to 2011, the ANC lost 500k votes, the DA won 750k votes. The EFF was new and did nearly 1.2m votes. Others also won or lost, but in much smaller quantities. These large shifts implied many protest votes, but also a substantial lie factor in the run-up (reminding of the 1980s failing dispensation when similar shifts occurred among the then electorate in times of big change).

There were 26.3m registered voters, of whom 14.9m voted (58%), including 258k spoiled votes. The top 10 parties took 14.3m of those votes, leaving half a million votes scattered over many tens of smaller parties, each gaining a few hundred to a few thousand votes. EGO was smallest with 26 votes – probably an extended family.

Short Note                                                                                      27 July 2016

Non-usual SA cyclical repeats   

by Cees Bruggemans          words 450

In recent years I often get the feeling when examining economic data that I have seen this movie before. Not just as a normal cycle but as an exceptional one. One area in which this is particularly strong is the SA residential building trade. But also in the SARB leading indicator for the broader economy.

It helps to have over 50 years of residential building plans passed data in which nearly a dozen cycles can be observed. Some of these cycles show similar kinds of amplitude and duration, suggesting ‘normal’ economic drivers. One or two stand out as different. One of those was the remarkable 2000-2007 surge. Another is what we are going through today, a very long stagnation at low levels of activity. What does it remind of most?

Short Note                                                                                      23 July 2016

Timing Junk...   

by Cees Bruggemans          words 480

The benefit of hindsight is a wonderful thing, if not very useful. Still, we might want to remember a few things before forgetting them. For instance, if SA doesn't succeed in getting its act together in time and eventually prevent a foreign debt downgrade to sub-investment grade (junk), the finance minister and rating agencies did us no favour in preventing it from happening as early as this June when the latest global search-for-yield was getting into full stride.

The time to downgrade is presumably most advantageous (the best of a bad outcome) into such a search-for-yield surge, when some foreign institutions will be forced to exit our bonds and may no longer buy them, but where lively demand from others could have assisted in absorbing some of such stress, and the accompanying sentiment switch against us.

Short Note                                                                                      22 July 2016

SARB predictably steadfast   

by Cees Bruggemans          words 370

When the moment came, two weeks before crucial local elections, the SARB went on hold. Unanimous decision, and expected, too. No interest rate change. The ECB’s Draghi had quite a different message in Europe, claiming to be ready, willing & able to act if necessary to provide more (liquidity) support. But then he would, too, wouldn't he, considering everything they are facing. Two central banks, both very steadfast, if on a different mission.

The SA inflation story as usual was an up-and-down-affair, with the SARB forecast shaved yet lower. Average now 6.6% for 2016, 6% for 2017 and 5.5% for 2018, with a spike shortly peaking at 7.1% (but fading all the time, too?). The risks, however, remain to the upside (though confusingly not all of them).

Short Note                                                                                      14 July 2016

From farmer Piet   

by Cees Bruggemans          words 520

Good morning Cees, thank you for your daily inputs and views on our economy. I would like, if I may, to put to you a few observations relevant to the SA farming community.

Regarding droughts and droughts…I can vividly remember your comment about three years ago referring to the looming drought…(16 years and no drought, until it happens…!). It came…and with a punishment unsurpassed by many.

Short Note                                                                                      5 July 2016

Curious SA job report  

by Cees Bruggemans          words 900

StatsSA published its quarterly employment statistics (QES) for 1Q16. It choose to highlight what supposedly happened during the 1Q16.

But the released job data had another feel to it as well, one that was apparently largely ignored, and yet that was most curious, seeing what we know about what has been happening to the SA economy these past three years specifically.

Short Note                                                                                      22 June 2016

Lead indicator freefall   

by Cees Bruggemans          words 380

The SARB leading indicator for future economic activity has now been rapidly declining for over three years (2013-2016), its free falling apparently further accelerating with another 0.9% decline in April from March. Some 9-out-10 component time series declined. Rather an overwhelming rout, and apparently still gaining momentum.

The only positive component, rising in April, was the Dollar commodity index for SA exports. So that part of the world environment was a little friendlier of late. But all the domestic time series with a predictive ability regarding the next 12 months cyclical condition of the SA economy competed with their downside weakness.

Short Note                                                                                      15 June 2016

Some light relief ahoy   

by Cees Bruggemans          words 800

Here are some words of encouragement as we approach winter solstice next week (21 June), after which the sun starts its hard slog back towards summer.

Britain won't leave Europe next week. At least, that's what bookmakers are still saying at this late hour, even as the “remain” lead keeps shrinking alarmingly. So all the precautionary sell-offs may have been for nothing, the anxieties shown by city folks about jobs lost and banks migrating can ease, and capital parked for safety sake in safe havens can return. Relax, it was all a bad hoax, not unlike Grexit three years ago. We hope.

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