The Week Ahead

10 - 14 December

See a full calendar of key economic reports and company announcements.

Global equity markets

Local data

Q3 2018 Gross Domestic Product (GDP) data released from Statssa has shown South Africa to have officially moved out of the technical recession highlighted in Q2 2018.

Real GDP grew by 2.2% quarter on quarter (in Q3 2018), although while the second and tertiary sectors of the economy grew by 4.5% and 2.6% respectively (quarter on quarter), the primary sector contracted by 5.4% quarter on quarter. Nominal GDP for the quarter is estimated at R1.27trillion in the third quarter.

Primary Sector

Within the primary sector, agriculture saw growth of 6.5%, led by increased production in Horticulture, field crops and animal products. The mining sector came under pressure contracting by 8.8% as production in platinum group metals (PGMs), iron ore, gold, copper and nickel decreased.

Secondary Sector

Manufacturing was the most significant contributor to growth within the secondary sector gaining 7.5% in the quarter. Electricity consumption declined by 0.9% and the construction sector contracted by 2.7% in the quarter.

Tertiary sector

The tertiary sector saw the trade, transport, finance, government and personal services divisions managing to grow in the quarter. The transport industry grew 5.7% over the period, boosted by increased activity in freight transport.

For full commentary on SA GDP and the Rand Report, click here

International data

G20 meetings in Argentina saw US President Donald Trump and China’s Premier Xi Jinping agree on a 90 day truce in their trade war. The truce means that the US will defer the next (largest) round of trade tariffs which were originally scheduled for January 2019. While the initial reaction to the news was positive in the market place, further comments from Donald Trump days after the meeting have tempered near-term optimism. In his comments, Trump has said that the US will either have a “real deal” with China, or no deal at all. The truce does however suggest that there is some urgency towards creating a deal between the two largest economies in the world, and that compromise can be made.

US Non-Farm Payroll data showed 155000 jobs to have been added in November 2018. Expectations were for 198000 jobs to have been added. The unemployment rate was reported to have remained at 3.7% in November, in line with consensus estimates.

Economic Calendar

Date Time Currency Event Previous
10 Dec 11:30 GBP GDP m/m 0.00%
10 Dec 11:30 GBP Manufacturing Production m/m 0.20%
10 Dec 13:00 ZAR Manufacturing Production Index y/y
11 Dec 11:30 GBP Average Earnings Index 3m/y 3.00%
11 Dec 15:30 USD PPI m/m 0.60%
11 Dec Tentative GBP Parliament Brexit Vote
12 Dec 10:00 ZAR CPI y/y 5.10%
12 Dec 13:00 ZAR Retail Sales y/y
12 Dec 15:30 USD Fed Chair Powell Testifies 0.70%
12 Dec Tentative USD CPI m/m 0.30%
12 Dec 15:30 USD Core CPI m/m 0.20%
13 Dec 14:45 EUR Main Refinancing Rate 0.00
13 Dec 15:00 EUR ECB Press Conference
14 Dec 10:00 ZAR Current Acc % of GDP
14 Dec 15:30 USD Core Retail Sales m/m 0.70%
14 Dec 15:30 USD Retail Sales m/m 0.80%

Source: Economic Calendar, as of 07/12/2018

Commodities

Oil prices have managed to extend their rebound this week, into meetings between OPEC (Organisation of Petroleum Exporting Countries) and Non-OPEC (mainly Russia) members regarding global supply of the commodity. OPEC has suggested a cut in oil production although, a currently embargoed Iran is looking for an exemption to supply cuts which is delaying a final deal between the Saudi led producers. Suggestions are that Russia too will look to reduce supply to the marketplace by around 200 000 barrels per day (BDP).

The Rand

The rand was an outperforming emerging market currency earlier on in the week following on from the Reserve Banks recent decision to tighten lending rates, as well as news that South Africa had exited out of an economic recession (as evidence by the real GDP growth of 2.2% year on year).

However, while the rand has been outperforming its emerging market peers, renewed trade uncertainty has seen risk appetite waning and developed market currencies / safe havens preferred in the short term.

The USD/ZAR has reversed course to trade back above the R14/$ mark. Continued gains would consider R14.50/$ as the next upside resistance target from the move.

The GBP/ZAR currency pair is trading back above the R18/gbp mark to find short term resistance around the R18/gbp mark. Markets will keep a close eye on next week’s vote (12 December) to see whether Theresa May will be able to pass a Brexit deal through a divided UK parliament.

Companies

Sanlam Limited: In its December 2018 operational update, indicated that it made significant strategic progress in the four months since the end of June up to the end of October 2018. During this period, the company concluded the largest transaction in its history, by finalising the acquisition of the remaining stake in Saham Finances. The company expects the economic and operating environment to remain subdued in its largest markets for the remainder of 2018.


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