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Cape Town - Investors will closely watch a barrage of economic data out this week, including an announcement on interest rates by the SA Reserve Bank's Monetary Policy Committee (MPC) on Thursday.
Citi Research, a division of Citigroup Global Markets said in a report on Monday it expects a slight slowdown in the consumer price index (CPI) in August to 6.1% from 6.3% recorded in July. The CPI for August will be announced on Wednesday.
Monthly inflation should measure 0.4% (month on month), driven by the petrol price increase and electricity surveys mostly.
Citi Research sees CPI tapering back within the Sarb's 3-6% target range in the fourth quarter. However, it cautions that, because this hangs on the state of the currency, any significant weakness of the rand would likely keep CPI above the 6% target ceiling for longer.
The MPC will make its two-monthly rate announcement on Thursday.
"We are not expecting any change in the current repo rate of 5.0%, given the Sarb’s policy dilemma of upside inflation risk, which is rand-driven mostly, and downside growth risk," according to the report.
"We are watching to see how the Sarb explains the recent emerging market currency respite due to a better-than-expected non-farm payrolls data out of the US last week and whether this tones down their language around rand volatility."
According to Citi Research it would be interesting to see whether the Sarb deems better China data more important to the GDP outlook than the disappointing US employment data and European industrial production.
It expects Sarb governor Gill Marcus to highlight the spate of labour unrest since July, reinforcing the policy dilemma of upside inflation risk - wages, rand - and downside growth risk.
This will be with particular emphasis that local production cannot enjoy the benefits of a weaker currency.
Strike watch
"It is good news that the strike in the construction sector has ended with the National Union of Mineworkers (NUM) agreeing to up to 12% wage hikes.
"It is, however, bad news that a 12% wage rise doubles the CPI rate and that the strike was lengthy, lasting 3 weeks," Citi Research said.
According to the report this will have a negative impact on GDP in the construction sector in the third quarter.
On Monday, members of the National Union of Metalworkers (Numsa) - mostly petrol attendants - were still on strike, demanding a 12% wage increase.
With employers offering 7%, Citi Research foresees that the strike is unlikely to be resolved soon.
Other announcements which will be closely watched this week, include Stats SA's employment statistics for the second quarter and whether the US Federal Reserve will reduce its $85bn a month bond purchasing stimulus programme.
Stats SA will also release the July retail trade sales figures on Wednesday and the July civil cases for debt and the wholesale trade sales data on Thursday.
- Fin24
Citi Research, a division of Citigroup Global Markets said in a report on Monday it expects a slight slowdown in the consumer price index (CPI) in August to 6.1% from 6.3% recorded in July. The CPI for August will be announced on Wednesday.
Monthly inflation should measure 0.4% (month on month), driven by the petrol price increase and electricity surveys mostly.
Citi Research sees CPI tapering back within the Sarb's 3-6% target range in the fourth quarter. However, it cautions that, because this hangs on the state of the currency, any significant weakness of the rand would likely keep CPI above the 6% target ceiling for longer.
The MPC will make its two-monthly rate announcement on Thursday.
"We are not expecting any change in the current repo rate of 5.0%, given the Sarb’s policy dilemma of upside inflation risk, which is rand-driven mostly, and downside growth risk," according to the report.
"We are watching to see how the Sarb explains the recent emerging market currency respite due to a better-than-expected non-farm payrolls data out of the US last week and whether this tones down their language around rand volatility."
According to Citi Research it would be interesting to see whether the Sarb deems better China data more important to the GDP outlook than the disappointing US employment data and European industrial production.
It expects Sarb governor Gill Marcus to highlight the spate of labour unrest since July, reinforcing the policy dilemma of upside inflation risk - wages, rand - and downside growth risk.
This will be with particular emphasis that local production cannot enjoy the benefits of a weaker currency.
Strike watch
"It is good news that the strike in the construction sector has ended with the National Union of Mineworkers (NUM) agreeing to up to 12% wage hikes.
"It is, however, bad news that a 12% wage rise doubles the CPI rate and that the strike was lengthy, lasting 3 weeks," Citi Research said.
According to the report this will have a negative impact on GDP in the construction sector in the third quarter.
On Monday, members of the National Union of Metalworkers (Numsa) - mostly petrol attendants - were still on strike, demanding a 12% wage increase.
With employers offering 7%, Citi Research foresees that the strike is unlikely to be resolved soon.
Other announcements which will be closely watched this week, include Stats SA's employment statistics for the second quarter and whether the US Federal Reserve will reduce its $85bn a month bond purchasing stimulus programme.
Stats SA will also release the July retail trade sales figures on Wednesday and the July civil cases for debt and the wholesale trade sales data on Thursday.
- Fin24
