Q2 current account deficit narrows, boosts rand

The current account deficit narrowed for the fourth consecutive quarter in the second three months of 2015, the central bank said on Tuesday, with the weak currency helping to boost exports while growth in imports slowed.

In its September quarterly bulletin, the Reserve Bank also said spending growth shrunk in the second quarter of 2015, due mainly to a slowdown in spending by households as consumer confidence showed a consistent decline and growth of real incomes slowed.

The current account shortfall narrowed at 3.1 percent of GDP in Q2 compared to a 4.7 percent deficit in the first three months of 2015, with a persistent decline in the rand helping to boost volumes of South African exports in platinum, gold, iron ore, chemical products and vehicles

"The lower domestic price of petrol and a further moderation in food price inflation underpinned the purchasing power of the household sector," the bank said.

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It warned, however, that consumer inflation pressures were expected to intensify due to higher global oil prices, rising food costs, and double-digit electricity tariff hikes.

Economists surveyed by Reuters had expected a 4.0 percent gap for the second quarter.

The rand gained 0.56 percent in response to the data, touching a session low of 13.4100 to the dollar.

The weakened rand, which has fallen over 10 percent against the dollar in 2015, helped lift exports during the quarter, while the subdued growth in the value of imports also contributed to the improved trade balance, the Reserve Bank said in its September quarterly bulletin.

"The positive trade balance in the second quarter of 2015 largely reflected increased global demand alongside the depreciated external value of the rand," the bank noted.

Export volumes rose most notably in platinum, gold, iron ore, chemical products and vehicles, the report said.

The bank warned, however, that consumer inflation pressures were expected to intensify due to higher global oil prices, rising food costs, and double-digit electricity tariff hikes, further weighing on household which was constrained by consistently low levels consumer and a lack of growth in real incomes.

- Reuters