STANLIB's Weekly Focus 01 September 2008

EXECUTIVE SUMMARY OF STANLIB’s WEEKLY FOCUS

ECONOMIC REVIEW

• The OECD (Organisation for economically cooperative and developed countries) leading indicator continues to point to a sharp slowdown in world growth, especially within the G7. This would argue for weaker commodity prices, however growth in China and Brazil is holding up well.
• US house prices declined by less than expected in June (-15.9%y/y/) but many strategists warn that we have not seen the bottom of the housing recession yet. August US consumer confidence numbers were better than expected, however this was off a very low base, thus consumer spending remains under intense pressure.
• US Q2 GDP (Gross domestic production) figures were sharply revised up to 3.3%q/q from an initial 1.9%q/q. The key issue is whether the growth rate cannot be sustained in H2 2008?
• In South Africa we were also treated to a mixture of the good and the bad:

Good…

• Unemployment eased to 23.1% during Q2 2008, as the SA economy successfully created 106 000 new jobs!
• Both private sector credit extension and M3 money supply eased during July.

And the bad…

• Both Consumer and Producer inflation July figures released were higher than market consensus.
• We recorded a shock trade deficit of R14.3bn in July, mainly as a result of an R8bn increase in oil imports.

• This Thursday the SARB (South African Reserve Bank) releases its Quarterly Bulletin, and we expect household consumption expenditure and debt to remain under pressure. On the back of the massive infrastructure spend by both the private and public sectors, fixed capital formation should continue to be the main engine of our growth.

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