In the markets: What to watch this week

Growth again featured as one of the major issues for the economy during minister of finance, Pravin Gordhan’s recent Budget Speech. As an emerging economy, South Africa’s growth is highly dependent on the growth of advanced economies, and therefore the release of GDP figures from various countries, notably the USA, Russia, India and Australia, as well from the Scandinavian region, will be closely watched this week.

The World Bank is forecasting global growth of 2.3% this year, a post-crisis low, and 2.7% in 2017. The International Monetary Fund (IMF) is more optimistic and currently estimates global growth for 2016 at 3.1%. It is projecting global growth of 3.4% for 2017, and 3.6% for 2018. 

SA’s growth rate is 0.2% in the third quarter of 2016, from 3.3% in the second quarter of that year and with a fourth quarter forecast of 0.6% year-on-year.

A lot of attention will be given to important economic announcements this week, including private sector credit together with M3 Money supply and balance of trade, due tomorrow.

Private sector credit in SA expanded 5.11% year-on-year in December 2016, while M3 money supply grew by 6.06%, compared to a 4.76% increase a month earlier.

M3 money supply is the money supply that includes “near, near money” such as individual and small business finances as well as the finances of larger institutions and corporations.

SA posted a trade surplus of R12.04bn in December compared to an upwardly revised R1.68bn deficit in November and better than market forecasts of a R6bn surplus. Imports slumped 19.6%, mainly due to lower purchases of original equipment components and machinery & electronics. Exports were down 6.1%, due to sales of vehicles & transport equipment and machinery & electronics.

Other important economic announcements due this week:

Monday

• US Core Durable Goods Orders

Tuesday

• US Consumer Confidence 

Wednesday

• SA Absa Purchasing Managers’ index (PMI) and Total Vehicle Sales
• China Manufacturing PMI
• UK Manufacturing PMI
• US Manufacturing PMI

Thursday

• UK Construction PMI
• US Unemployment Claims

Friday

• SA Standard Bank PMI
• UK Services PMI
• US Non-Manufacturing PMI 
• US Federal Reserve chair Janet Yellen delivers a speech on the economic outlook

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers. Click here to visit the firm’s website.