Reuters SA Survey of Economists (May 2008)

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The May edition of the Reuters South African Survey of Economists has just been published. (The Econometer is a measure of economic sentiment drawn from a monthly poll of forecasts by leading economists in South Africa and abroad and presented in the form of an index. The index reflects the forecasters’ sentiment for a quarter 12, 11 or 10 months forward.)


SA economic confidence plunged to a new five and a half year low in May as conditions deteriorated and the near-term outlook worsened. The May Reuters Econometer plunged to 184,54, its lowest level since September 2002, from 207,50 in April. The current scenario of sharply slower economic growth (as confirmed by official data for Q1 2008 reflecting growth of just 2,1% q/q) and steeply rising inflation is projected to continue with quarterly growth rates now expected to remain well below 4% until the middle of next year.

Meanwhile inflation rates, after reaching their own five and a half year high in April, are now forecast to continue rising in the remaining quarters of 2008 before slowing into 2009 albeit remaining firmly abvoe the 3% – 6% target band by the end of next year. This is a substantial deterioration from previous estimates – recent forecasts (February 2008) saw the targeted CPIX inflation rate turning to within the upper end of the target band by Q2 2009.

Consequently, interest rates are seen rising further in the very short term, at least a 50 bp hike at the June MPC meeting now seems certain, and whereas the top of the rate cycle was previously forecast at arriving in the current quarter (Q2 2008) at a rate of 14,50%, this has now been pushed out to Q4 2008, with Prime seen climbing as high as 17,00%.

Please click the thumbnail below for the full report.


Source: Sasfin, June 5, 2008.


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