SAMANTHA ENSLIN-PAYNE: Don't crack the champagne yet on not-so-spectacular rate cut

21 July 2019 - 00:08 By

The long-awaited interest rate cut finally materialised this week - a not-so-spectacular 25-basis-point drop, so don't crack the champagne. It may, at most, put a couple of hundred rands into the pockets of consumers who are paying off debts. But it barely moved the needle for retail stocks. Investors know the likes of Woolworths, Massmart, Shoprite and Pick n Pay need a lot more spending power than that to lift sales. Data released earlier this week shows retail sales rose by a meagre 2.2% in May, higher than expectations but lower than the previous month.

Economic growth is expected to have materialised in the second quarter (with the figures due to be released in early September), but this will come after a sharp contraction in the first quarter. For the year, the Reserve Bank is forecasting economic growth of just 0.6%. And along with the meagre growth, this week's rate cut puts us back to where we were before the rate hike in November last year. We are treading water. The Reserve Bank's monetary policy committee (MPC) has dampened expectations that another rate cut could materialise this year...

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