D-day for early rate cut

Johannesburg - Thursday may be the last opportunity for an early interest-rate cut.

If weak manufacturing numbers for January come out on Thursday, they would be yet another sign that the economy is in severe stress. The motor industry, in particular, is in trouble, and the rest of the manufacturing sector experienced its biggest decline in 48 years over the past quarter.

Economists expected the Reserve Bank's Monetary Policy Committee (MPC) to have met shortly after the poor growth figures announced last month, in order to cut interest rates further.

Most central banks in the rest of the world have already cut interest rates to the bone, but in South Africa the repo rate has come down only 1.5 percentage points since the start of the financial crisis.

Manufacturing figures for January could give a good indication of the direction in which the economy is heading for the first quarter. In the fourth quarter the sector was the albatross around the country's neck, and the economy contracted for the first time in a decade.

An announcement on an early rate cut has however not been forthcoming. If it takes much longer it could be too late for an interim drop.

A cut this week could, according to Jaanre Fourie, an economist at Metropolitan Asset Managers, still be regarded as an interim measure.

A meeting next week, however - after the retail sales figures come out - or the week thereafter when the latest inflation numbers are announced, could be regarded as an emergency step. The markets could then react differently and perhaps even negatively to it, she reckons.

Even though the national treasury still expects economic growth of 1.2% this year, some experts are not so positive.

- Sake24.com

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