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Current commentary

Consumer mood remained gloomy in the second quarter of 2017 – 12 July 2017
Consumer sentiment dives to negative nine index points
The Bureau of Economic Research’s (BER) Consumer Confidence Index (CCI) slid from negative five index points to negative nine in the second quarter of the year. Click here to read more.

High levels of uncertainty keeps SA interest rates on hold at 7.0%
Interest rates steady in line with consensus

The South African Reserve Bank’s (SARB) interest rate decision was in line with the Reuters consensus, in which all 24 surveyed analysts predicted that the SA repo rate would remain steady at 7.0%. Click here to read more.

Notable drop in April 2017 headline inflation to 5.3%
Lowest income-earning deciles have reaped the largest benefit of a drop in inflation in recent months

Headline consumer price inflation (CPI) dropped from 6.1% in year-on-year (y/y) terms in March to 5.3% y/y in April 2017, but increased marginally by 0.1% in month-on-month (m/m) terms. Headline inflation positively surprised the market (consensus was anticipating a print of 5.6% y/y) and Momentum Investment’s more optimistic forecast of 5.4% y/y.  Click here to read more.

March 2017 retail sales surprise positively, but momentum remains weak
Low base effect boosts retail sales in specialised food and furniture categories

Real retail sales increased by 0.8% in year-on-year (% y/y) terms in March 2017, buoyed by a robust 14.8% y/y increase in the sales of specialised food, beverages and tobacco, followed by a rebound in growth in furniture and appliances sales to 8.2% y/y. These growth rates compare favourably when compared to the average growth rate of 3.8% y/y and negative 3.3% y/y over the past twelve months, respectively. Click here to read more.

Headline inflation beats expectations at 6.1% in March 2017 - 19 April 2017
Headline inflation beats expectations of 6.4% year-on-year (y/y), printing at 6.1% y/y in March 2017

Headline consumer price inflation (CPI) decelerated from 6.3% y/y in February to 6.1% y/y in March 2017, but increased by 0.6% in month-on-month (m/m) terms on the back of a hike in education (7% m/m) and rental (1.1% m/m) costs. Click here to read more.

Fitch downgrades SA to junk status, but outlook revised to stable – 7 April 2017
Following the lead of Standard and Poor’s Global Ratings (S&P), Fitch downgraded SA’s foreign currency rating to junk

Similar concerns led Fitch Ratings agency to downgrade the country’s long-term foreign and local currency ratings by one notch from BBB- (investment grade) to BB+ (junk status). Click here to read more.

South Africa loses investment grade (IG) status on anticipated unfavourable policy shifts - 4 April 2017
Changes in SA’s executive leadership have led to heightened political and institutional uncertainties

Although Standard and Poor’s Global Ratings (S&P) was scheduled to release a ratings review on SA on 2 June 2017, recent changes to the country’s executive leadership have, in its view, brought policy continuity into question. Click here to read more.

SA repo rate unchanged, but tone less hawkish than before – 31 March 2017
Interest rates steady in line with expectations

Today’s interest rate decision was in line with the Reuters consensus, in which all 29 surveyed analysts predicted that interest rates would stay on hold at 7.0%. Click here to read more.

President Zuma makes extensive changes to SA cabinet - 31 March 2017
Long-anticipated cabinet reshuffle finally triggered

For some time there has been consistent rumours that President Jacob Zuma was about to reshuffle his cabinet to adjust to the dawning reality that he has lost the confidence of some key ministers that have increasingly becoming more vocal in opposing him in making decisions they deemed to be inappropriate for the direction the country needed to embark upon, to successfully complete the next chapter of radical socio-economic transformation. Click here to read more.

Headline and core inflation measures ease further in February 2017 – 23 March 2017
Headline inflation prints lower at 6.3% y/y, but was affected by a sharp increase in insurance costs

Headline consumer price inflation (CPI) decelerated from 6.6% year-on-year (y/y) in January 2017 to 6.3% y/y in February, but increased by 1.1% in month-on-month terms, thanks to a steep hike in the insurance category which surged 7.3% m/m. Click here to read more.

SA businesses not in a rush to hire or invest – 15 March 2017
Businesses are still feeling the pressure of a low-growth environment

The Bureau of Economic Research’s (BER) Business Confidence Index (BCI) inched higher by two index points to 40 in the first quarter of 2017 (see chart 1), only marginally higher than a dismal 37 index point-average posted for 2016. Click here to read more.

Making sense of the March 2017 US Federal Reserve rate-setting meeting – 16 March 2017
Federal funds rate hiked, but interest rate projections largely unchanged

The United States (US) Federal Reserve (Fed) raised the target range for the Fed funds rate for the third time since the global financial crisis. Click here to read more.

Sluggish economic activity in 2016, but growth has likely bottomed – 7 March 2017
Real GDP contracted in the final quarter of 2016, leaving overall growth for the year at 0.3%

Real gross domestic product (GDP) growth fell 0.3% in the final quarter of 2016 relative to the 0.4% (upwardly revised from 0.2%) acceleration in the third quarter in seasonally adjusted annualised terms (saar). Click here to read more.

Early signs of a mild recovery in SA’s manufacturing sector – 1 March 2017
Manufacturing sentiment settling in positive territory for the second month in a row

The Absa/Bureau of Economic Research (BER) Purchasing Managers’ Index (PMI) inched 1.6 index points higher to 52.5 points in February 2017, remaining in positive territory for a second consecutive month. Click here to read.

SA Budget FY2017/18: Gordhan guarding government’s gates – 23 February 2017
SA remains on a prudent fiscal management path

Amidst a low-growth environment, Finance Minister Pravin Gordhan kept SA on a prudent fiscal management path by pulling a number of tax levers. Click here to read more.

SA budget preview – staying the course on fiscal consolidation
Sound fiscal management and commitment to reform necessary to allay rating agencies’ fears of political interference

With many indicators of economic development in SA falling short of its debt peer group, broad political/institutional stability and macro policy continuity remain key in preserving SA’s investment grade status.
As such, all eyes will be on government’s ability to stay the course on sound fiscal management in the upcoming national budget to be tabled by National Treasury on 22 February 2017. Click here to read more.

State of the Nation Address – government’s agenda for 2017 – 10 February 2017
Elevated policy uncertainty has increased market awareness around the State of the Nation Address (SONA) – an annual report on the state of the country’s affairs, progress on government’s priorities and an outline of government’s agenda for the coming year. Click here to read more.

SA repo rate held steady, while global risks keep tone cautious – 24 January 2017
Interest rates steady in line with expectations

Today’s interest rate decision was in line with  the Reuters consensus, in which all surveyed analysts predicted that interest rates would stay on hold at 7.0%. Click here to read more.

Asset class returns in 2017 determined by monetary/fiscal policy switch – 14 December 2016 
Stimulus baton passed from monetary to fiscal policy in the developed world
Developed market (DM) monetary policy stimulus most probably has moved beyond its peak, with limited scope for more policy accommodation through interest rate cuts and quantitative easing (QE) against the backdrop of historically low interest rate levels, bulging central bank balance sheets, accelerating inflation and mounting evidence of diminishing effectiveness. Meanwhile, disgruntled DM voters have intensified pressures on politicians to improve their economic circumstances by making their voices heard in a tangible way through the ballot box in 2016. Click here to read more.

2017 Economic outlook: Politics taking centre stage – 13 December 2016 
Political uncertainty continues to dominate the economic outlook  

The global economy has undergone a prolonged period of disappointing growth following the worst financial crisis since the Great Depression in the 1930s. Several structural factors, including ageing populations, over-indebtedness (see chart 1) and weak productivity, have stifled the uneven economic recovery following the 2008/2009 global financial crisis. Click here to read more.
 
Ratings reprieve, but S&P echoes concerns over political interference – 5 December 2016

S&P lowers local currency rating, but leaves foreign currency rating intact at BBB- with a negative outlook
Although S&P Global Ratings left SA’s foreign currency rating unchanged at BBB- with a negative outlook, the agency noted that financing needs had surprised negatively exceeding previous expectations, while a low ‘gross domestic product (GDP) growth path has exacerbated SA’s economic (per capita wealth) and fiscal performance. Click here to read more. 

Fitch and Moody’s ratings reviews – political instability is a shared concern
Fitch lowered its outlook to negative, but the rating remains unchanged for Fitch and Moody’s

Fitch Ratings lowered its outlook on SA’s long-term sovereign debt rating to negative from stable, but kept the rating intact at BBB-. Moody’s, which rates SA one notch higher than S&P Global Ratings or Fitch at Baa2, left the rating (and the negative outlook on the rating) unchanged.
A common concern voiced by both ratings agencies was the current state of political affairs in SA. Please click here to read more.

Interest rate policy held steady, but tone remains cautious – 25 November 2016 
Interest rates steady in line with expectations

Yesterday’s interest rate decision was in line with the market’s expectation. All 15 respondents to the Bloomberg survey expected the repurchase rate to remain on hold at 7.0%. Please click here to read more.
 
October’s headline rate of inflation rises above expectations – 24 November 2016
Headline inflation exceeded expectations, but is likely nearing a peak

Headline consumer price inflation (CPI) rose to 6.4% y/y, marginally higher than Momentum Investments’ own and the market’s estimate for October 2016. In month-on-month (m/m) terms, inflation increased by 0.5%, partly owing to higher food and transport costs. Please click here to read more.

President Trump – the next step in global disestablishmentarianism – 9 November 2016
The shock outcome to the US presidential race has roiled global financial markets. At the time of writing, S&P futures were down around 2%, while the Japanese Nikkei lost 5.4%. The Mexican peso, which has acted as a barometer for a Trump win in the US elections, plummeted around 8%, with losses extending to a wider range of emerging market (EM) currencies. Asset classes traditionally viewed as safe-havens were bid higher. The spot price of gold rose 2.3%, while the Japanese yen gained 2.1%. Similarly, US bond yields dropped initially on a flight-to-quality trade, but later retraced on fiscal worries. Click here to read more. 

MTBPS 2016: Additional taxes and spending cuts used to negate weaker growth impact on fiscus - 26 October 2016
In its 2016 Medium-Term Budget Policy Statement (MTBPS), South Africa’s National Treasury unsurprisingly revised its estimates of real GDP growth lower to around 1.5% p.a. between the current fiscal year (FY2016/17) and FY2018/19...Click here to read more.

SA medium-term budget – constrained resources facing multiple demands - 21 October 2016
Since the tabling of the National Budget in February 2016, downside growth risks to the global economy have materialised. In its latest October 2016 World Economic...Click here to read more.

Finance Minister Gordhan’s summons lifts SA’s political temperature - 12 October 2016
South Africa’s political risk profile was lifted yesterday when the National Prosecuting Authority issued Finance Minister Pravin Gordhan, together with former South Africa Revenue Service (SARS) Commissioner Oupa Magashula and former SARS Deputy Commissioner Ivan Pillay...Click here to read more.

2Q16 GDP recovery influenced by low base in mining and manufacturing - 6 September 2016
Real GDP growth increased by 3.3% in the second quarter of the year relative to the first quarter in seasonally-adjusted annualised terms (saar).Click here to read more.

August PMI sinks below 50 - 1 September 2016
The Barclays/Bureau of Economic Research (BER) Purchasing Managers’ Index (PMI) plunged 6.2 points to 46.3 points in August 2016, signalling tougher...Click here to read more.

Financial pressure on households negatively impacting private sector credit growth - 31 August 2016
Growth in broad money supply (M3) slowed markedly from 5.9% y/y in June to 4.4% y/y in July 2016, coming in below the market’s expectation for a decrease...Click here to read more.

Inflation slows towards top end of target band - 24 August 2016
Headline consumer price inflation (CPI) dipped to 6.0% y/y in July 2016 from 6.3% y/y in June, in line with our own estimate and marginally lower than the Bloomberg median expectationClick here to read more.

2016 Local government elections under the spotlight - 8 August 2016
Having grown steadily since the 2000 municipal elections, this year has seen a record number of political parties contesting the 2016 local government elections. Click here to read more.

July PMI dips slightly, but still points to a relatively firm start in 3Q16 - 1 August 2016
The Barclays/Bureau of Economic Research (BER) Purchasing Managers’ Index (PMI) fell by 1.2 index points to 52.5 in July 2016. Readings above 50 signal an expansion ...Click here to read more.

SARB presses the pause button and keeps interest rates steady at 7% - 21 July 2016
In its latest World Economic Outlook Update, the International Monetary Fund (IMF) noted that the global outlook for 2016/17 has worsened on the back of an increase in political uncertainty. Click here to read more.

No surprise in June headline inflation print - 20 July 2016
According to Stats SA, headline inflation rose to 6.3% y/y in June from 6.1% in May, in line with our own estimate and only marginally higher than the market’s expectations ... Click here to read more.

Deterioration in 2Q16 consumer confidence - 5 July 2016
The Bureau of Economic Research’s (BER) Consumer Confidence Index (CCI) fell two points from a reading of negative 9 index points in the first quarter of the year to negative11 points in ... Click here to read more.

The Brexit reality: Britain votes to leave the European Union - 24 June 2016
Voter turnout in Britain’s referendum on European Union (EU) membership was high at 72.2% (33.6 million ballot papers). This was lower than the c.82% turnout for the Scottish ... Click here to read more.

May headline inflation print surprises positively - 22 June 2016
Headline inflation dropped to 6.1% in May in year-on-year terms, undershooting our own (6.3%) and the Bloomberg consensus (6.4%) forecast ... Click here to read more.

Making sense of the June 2016 US Federal Reserve rate-setting meeting - 21 June 2016
A dismal payrolls print for the month of May (38 000 jobs added versus a consensus expectation for a 162 000 gain) led to a significant repricing of interest rate hike expectations... Click here to read more.

Fitch retains stable outlook, but warns against weak economic growth - 13 June 2016
A positive outcome by Fitch rating agency followed an earlier decision by Moodys and S&P to leave SA’s ratings unchanged at Baa2 (with a negative outlook)... Click here to read more.

Material slowdown in real GDP growth in 1Q16 - 13 June 2016
Stats SA reported a material slowdown in real GDP growth from 0.4% q/q saar (seasonally adjusted annualised rate) in the final quarter of 2015 to -1.2% in 1Q16... Click here to read more.

2Q16 Growth concerns rise in response to weaker business confidence - 13 June 2016
The Bureau of Economic Research’s (BER) Business Confidence Index (BCI) decreased for the sixth consecutive quarter, declining to its weakest level since the fourth quarter of 2009.. Click here to read more.

SA dodges the downgrade bullet for now - 6 June 2016
In line with our and the market’s expectations, S&P Global Ratings kept SA’s long-term foreign currency sovereign credit rating at BBB- and affirmed the local currency rating at BBB+. Click here to read more.

SA manufacturing PMI adjusts lower in May - 1 June 2016
After jumping 4.4 index points higher in April, the Barclays/BER Purchasing Managers’ Index (PMI) declined by 3.0 index points in May to 51.9. Click here to read more.

South Africa sovereign debt downgrade risk - 1 June 2016
South Africa’s sovereign debt is currently rated investment grade (IG) by all three main rating agencies (see table 1). While both S&P and Fitch now have SA’s foreign currency government debt rating at the lowest rung of IG (BBB-)... Click here to read more.

SARB pauses to reflect on previous interest rate tightening - 19 May 2016
In a recent speech the South African Reserve Bank (SARB) noted that heightened uncertainty had complicated the conduct of monetary policy. In their assessment of the global economic backdrop, they mentioned a number of key economic risks threatening the outlook for global economic activity. Click here to read more.

Tough road ahead for SA consumers implies weak GDP performance - 18 May 2016
The National Development Plan outlines the need to shift South Africa’s (SA) growth trajectory from one led by consumption to higher levels of fixed investment and exports (see chart 1). Higher levels of investment (supported by reliable public infrastructure and skills) are needed to propel living standards and reduce inequality. However, conditions for higher fixed investment remain unfavourable. Falling corporate profitability, muted domestic demand prospects and continued uncertainty around the direction of economic policy in SA has led to sluggish growth in private fixed investment, leaving overall economic activity dependent on household consumption spend. Click here to read more.

April headline inflation print in line with expectations - 18 May 2016
Year-on-year inflation dipped to 6.2% in April from 6.3% y/y in March, but increased by 0.8% over the month largely owing to a drought-induced acceleration in food prices. Click here to read more.

Pace of improvement in April PMI unlikely to be sustained - 3 May 2016
In a recent speech, the South African Reserve Bank (SARB) pointed to a key threat facing the SA economy. Like many other net commodity-exporting nations, SA has faced a terms-of-trade (export prices relative to import prices) shock as a result of the persistent decline in commodity prices since 2011.. Click here to read more.

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