South Africa’s data upside surprises

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By Cees Bruggemans, Chief Economist of FNB.

It is quite remarkable how one becomes used to instant Twitter distribution. When the service is then yanked away and one has to go back to old-fashioned email it feels like slow coach indeed.

This is what I have been burning to say these past 24 hours or so:

“Car sales strong, cement output rising, construction activity up, stock market resilient, manufacturing a jumping jack-in-the-box. Not all bad”

Car sales surprised in September by remaining a good deal stronger than expected.

Cement output for August was 12.7% up year-on-year, if with one extra trading day. Even so, trading day output is clearly rising.

The FNB/BER construction confidence survey for 3Q2011 may have shown 4-out-of-5 contractors still dissatisfied, considering present business conditions unsatisfactory, but their responses regarding activity, tendering, demand, adequacy of building material all suggested a rise in activity to be underway in recent quarters, with more optimism expressed about 4Q2011.

The surprise today was manufacturing, after falling 6% y/y in July now rising by nearly 6% in August.

The good news wasn’t in iron and steel (still a very bad -18% y/y on account of steel mills out of action or global demand being supplied from elsewhere).

Neither was it in petrochemical refining, still -13% y/y. Paper products -12%. And of course textiles -10%.

But motor industry output did +41%, communication equipment +19%, non-ferrous metals +17%, beverages +15%, rubber products +12%, household appliances +12%, furniture +11%, meat 8%.

Despite a very bad winter, the spring started on a high note, with upward potential from a re-established, more normal base.

Meanwhile SARB Governor Marcus spoke in Parliament, mentioning the absence of a credit bubble, and the lack of demand being a huge concern.

If the EU crisis heat were to moderate, and our inflation were to be seen as mostly target-bound, the slow global growth and our own sub par growth performance might still see rate cuts. First opportunity in November, with the first increase of any new rising rate cycle likely only very late in coming (would that be in 2013?).

Meanwhile, overseas markets like the recent US data. Also the EU noises about bank recapping and the likely addressing of the sovereign debt issue, allowing risk to be switched back on.

Instead of testing 8.50:$, the Rand was today back below 7.80:$ once again.

August and September proved distraught times. Now for the last quarter of 2011. Could it turn out better than expected?

Source: Cees Bruggemans, FNB, October 12, 2011.

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