SARB quarterly bulletin - Q4 2013 Nedbank Economic Unit • Growth in gross domestic expenditure (gde) fell by 3,6 % in the fourth quarter of 2013 following a 0,8 % decline in the previous quarter (revised from 1,9 % growth), dragged down by slower growth in household spending and fixed capital formation as well as a sharp drop in inventories. Growth in consumption expenditure by general government, in contrast, improved slightly over the quarter. • In 2013 as a whole, gde grew by 2,2 %, down from 4,0 % in 2012. • The ratio of household debt to disposable income fell to 74,3 % from 75,0 % in the third quarter, and edged down to 75,2 % in 2013 from 75,6 % in 2012. • Growth in domestic demand is likely to remain lacklustre this year as household financial conditions are under pressure, and general government remains committed to reduce the fiscal deficit and the wage bill over the medium term. Firms will still be wary of expanding capacity aggressively in the current weak economic environment, while high input costs, persistent labour related disputes in some of the key industries as well as general infrastructure constraints will also hurt sentiment. • The current account deficit narrowed but remained large at 5,1 % of gdp from a revised 6,4 % (previously 6,8 %) in the third quarter. This was higher than our forecast of 4,7 % and the market consensus of 5,7 %. For 2013 as a whole the deficit widened marginally to 5,8 % from 5,2 % in 2012. The trade deficit narrowed to a seasonally adjusted R45billion in the fourth quarter from R91billion, totalling R74billion in 2013 from R39billion in the previous year. Net services, income and current transfer payments rose to R134billion from R125billion. • The capital account surplus dropped to R35,9billion from R79,9billion, equivalent to 4,1 % of gdp from 9,3 %. For 2013 as a whole the surplus rose to 6,0 % of gdp from 5,5 % in 2012. • The current account deficit is likely to narrow further during this year on the back of improving global conditions. However, any disruptions to domestic production will be negative. • These numbers confirm that underlying demand remains lacklustre, while the current account widened in 2013 mainly due to domestic supply disruptions. The Reserve Bank raised the repo rate in January, prompted by the weaker rand and the risk of high inflation for an extended period. We expect the Monetary Policy Committee to hike interest rates again at the 25 -27 March meeting and then maintain steady rates until the second half of 2015. The biggest risk to the inflation outlook and so the interest rate trajectory is the currency. The recent strength of the rand has reduced the probability of a March move, but the climate remains fragile.
Posted on: Wed, 12 Mar 2014 09:38:16 +0000
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