Trade balance likely to have remained in surplus in July

28 August 2016 - 15:35 By TMG Digital

South Africa’s international trade balance is likely to have remained in surplus in July‚ according to Investec economist Kamilla Kaplan. She says the international trade account is forecast to have yielded a R5bn surplus in July‚ following surpluses of R18.4bn in May and R12.5bn in June.“Based on the available figures to date‚ on a cumulative basis‚ for the first six months of the year the trade account was in surplus at R12.5bn‚ compared to a deficit of R22.9bn in the same period last year.”The trade balance data for July will be released on Wednesday.Other key economic data due for release this week include M3 money supply and private sector credit extension figures for July‚ which are scheduled for release on Tuesday‚ and new vehicle sales for August and July electricity consumption and production data on Thursday.The August manufacturing PMI is also scheduled for release on Thursday.Kaplan points out that the weak momentum in global trade‚ coupled with the deterioration in domestic demand‚ has acted as a restraint on manufacturing production.“Manufacturing production increased by just 1.6% year on year (y/y) in the first half of this year after having stagnated in 2014 and 2015. The advance indications provided by the manufacturing PMI gauge suggest that the modest pace of activity‚ registered in the first half‚ continued into te third quarter of 2016.“In July‚ the PMI registered 52.5 and the August reading is forecast at 52.0.”In August‚ new vehicle sales are likely to have continued contracting at a double digit rate‚ following a decline of 11.0% y/y in the first seven months of the year.“The vehicle sales performance is reflective of sluggish economic growth and depressed business and consumer confidence‚” explains Kaplan.Household credit extension growth has steadily slowed‚ to the vicinity of 2.0% y/y in the second quarter of 2016 from double digit rates prior to the 2008/09 recession‚ Kaplan notes.“The muted underlying household credit dynamics are a function of high levels of existing consumer indebtedness‚ relatively tight credit criteria applied to households and the higher interest rate environment. Corporate credit growth has been comparatively stronger at rate above 10% y/y‚ with the SARB noting that ‘volatility in cash flows’ has prompted ‘a recourse to credit’.“Overall‚ private sector credit extension is forecast to have moderated to 7.0% y/y in July from 7.3% y/y in June‚” says Kaplan...

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