Boom & Gloom: May 2016

Boom & Gloom

Boom & Gloom: May 2016

Our View of the Investment Markets

This table reflects our view of the relevant assets, based on expected performance.

Summary table


Economic Activity

The Barclays SA Manufacturing PMI spiked to 54.9 in May from 50.5 in April, while the industry wide Standard Bank SA PMI improved slightly to 47.7 in May from 40 in April.

The SACCI Business Confidence Index improved from 81.2 in April to 85.5 in May. The current level still remains close to the all-time lows experienced in 1993.

Namsa vehicle sales contracted 9.2% in May, an improvement from the 14% contraction in April. We expect the contraction to continue, although at a slower pace as the interest rate hiking cycle evolves.

Unemployment grew 26.7% year-on-year (YoY) in the first quarter of this year (up from 24.5%). This is the highest rate of unemployment in the history of the Quarterly Labour Force Survey data. The largest contributors to the rise in unemployment were trade (-3.6% quarter-on-quarter (QoQ)), manufacturing (-5.8% QoQ) and construction (-5.3% QoQ).

Mining production reduced by 3.4% month-on-month (MoM) in May from an expansion of 1.3% in April. Manufacturing production reduced by 0.3% MoM in May from 1.3% MoM in April.

Retail sales grew 2.8% YoY in May, down from the 4.1% in April, as real disposable income diminished.

External Accounts

Offshore investors sold bonds and equities in May, this has been a trend over the past nine months.


In May inflation declined to 6.1% YoY, from 6.2% in April, driven by lower than expected food price increases. The numbers still reflect limited currency through flow. We expect elevated inflation numbers to be above the upper 6% barrier for 2016 and 2017.

Monetary Policy

The Reserve Bank’s monetary policy committee (MPC) held the repo policy interest at 7% on Thursday 19 May. The Governor, stated in a recent comment that they face a serious dilemma managing inflation due to subdued growth and high inflation.

Ratings Agency News Flow

Moody’s noted that:

  • − The economy may be reaching a turning point.
  • − It sees some improvement in growth in the next few years.
  • − The spending ceiling has been respected.
  • − Some ‘bottlenecks’ are not as pronounced.

It did however add that political decisions that risk reforms could affect ratings.

However, Fitch was somewhat more, stating that:

  • − The political will for fiscal consolidation was a risk.
  • − Challenges also include downward revisions in GDP growth estimates.


Rating Status





Total return to 31/5/2016, in domestic currency

Market Perf



Total return to 31/5/2016

Sector perf

Equity performer

Equity Detractors





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Eugene Goosen

Eugene Goosen


Source: Bloomberg LP, Credit Suisse,


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