Trade balance figures highlight large deficit

Trade balance figures reported last month by the South African Revenue Service showed a large deficit of R20.7 billion in October.

The new inclusion of peripheral African neighbors Botswana, Lesotho, Namibia and Swaziland revised the deficit figure significantly lower to R11.95bn.

The trade balance accounts for around 46% of the current account deficit, which was reported this week, and now amounts to 6.8% of GDP in 3Q2013. The widening deficit at R232.7bn, is the largest reported since 2008, five years ago.The revised current account calculation now includes the aforementioned trade with our African neighbor’s, which if omitted would worsen the figure to above 7% of GDP. 

Foreign direct investment for the third quarter was R47.4bn, which is more than R30bn better than the previous quarter. This was largely due to the conclusion of the buyout of South Africa’s third largest pharmaceutical company Cipla Medpro by Cipla India. 

The poor domestic economic news combined with the expectation of stimulus being reduced sooner rather than later in the US, witnesses our rand weakening to multiyear lows. The rand has shed around 25% against the greenback so far this year. 

Internationally, the US reported a vast improvement in the unemployment rate which dropped to 7%, while 203 000 jobs were added to the Non-Farming payroll. The news combines with recent improved economic data out of the world’s largest economy and serves to reinforce the prospect of “tapering” current easing measures. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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