STANLIB's Weekly Focus 09 June 2008

EXECUTIVE SUMMARY OF STANLIB’s WEEKLY FOCUS

ECONOMICREVIEW

* This week all eyes will be on the interest rate decision by the MPC (Monetary Policy Committee) on Thursday 12 June 2008. Market consensus is for a full 100bps hike in the repo rate, effectively taking it from 11.5% to 12.5%, due to broad based inflationary pressures. However, signs of the real economy slowing are very evident, especially after passenger vehicle sales plummeted in May this year by 28.1% y/y!

* In the face of higher interest rates, there has been some discussion about the possibility of South Africa adjusting its inflation target. Hopefully lessons can be learnt from Turkey who recently revised up their inflation target, hurting their currency, equity and bond markets.

* Offshore, US markets closed in the red on Friday after unemployment increased from 5.0% in April to 5.5% in May, ahead of expectations for an increase to 5.1%. Non-farm payrolls dropped for a fifth consecutive month by 49 000, and the previous 2 months were revised down by 15 000. Clearly the US consumer slowdown has still got some way to go.

To read the full report click here (PDF file 239kb)