STANLIB's Weekly Focus 18 August 2008

EXECUTIVE SUMMARY OF STANLIB’s WEEKLY FOCUS

ECONOMIC WEEKLY REVIEW

• Last week, as predicted by our Economics and Fixed Interest team, the MPC (Monetary Policy Committee) opted to keep the Repo rate on hold at 12%. This meant that the Prime rate also remained at its current level of 15.5%, a welcome relief for the very thinly stretched South African consumer. We expect rates to remain unchanged until the middle of next year, where the Reserve Bank hopefully has enough space to start easing the interest rate burden.
• As expected, June Retail sales remained under significant pressure, down year-on-year for the fourth consecutive month! Recent figures showed government tax revenue marginally ahead of budget at end June, but the slowdown in expenditure tax revenue is a significant concern.
• STANLIB and market consensus expect SA GDP (Gross Domestic Product) to average between 5% and 6% for Q2 2008, well ahead of the below trend growth of 2.1% recorded for Q1. This is in stark contrast to the developed nations who battled to record economic growth during the same time period. The Japanese economy declined by 0.6%; the Eurozone by 0.2%, with Spain the only country showing positive growth of 0.1%; and the UK revised their growth forecast down to 0.1% for the year. This slowdown in world growth should hopefully relieve some of the pressure on the consumption of soft and hard commodities.

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