Current commentary

Mining and manufacturing expected to detract from third-quarter growth following soft September 2019 numbers

  • Manufacturing production for September 2019 contracted 2.4% and reported a steeper decline relative to the 1.5% contraction in August 2019. Only one division reported positive growth in September 2019.
  • Manufacturing production declined by 0.9% for the third quarter of 2019, with only four out of the 10 manufacturing divisions growing.
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Discouraging retail trade sales in September 2019

  • Retail trade sales for September 2019 disappointed and only grew by 0.2%, which was below the 1.0% growth rate reported in August 2019, and below the Iress expectation of 1.9%. Growth in the third quarter slowed from the second quarter and was lower than the same period a year ago.
  • Hardware retailers subtracted 0.5% from retail sales growth in the third quarter, while growth in sales from general dealers as well as food, beverage and tobacco retailers was flat.
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Consumer confidence returns to negative territory in the third quarter of 2019

  • The Consumer Confidence Index (CCI) for the third quarter of 2019 surprised to the downside to negative seven index points from five index points in the second quarter of 2019.
  • The survey was conducted after a string of negative news plagued the country, including the 29.0% unemployment rate, high femicide, xenophobic attacks and retrenchment announcements from the banking sector.
  • Click here to read more.

October 2019 PMI still stubbornly below 50 neutral mark

  • The Purchasing Managers’ Index (PMI) for October 2019 improved to 48.1 index points from 45.1 index points reported in September 2019, although still below the neutral mark.
  • Four out of five main sub-components improved in October 2019, although all sub-indices are still below the 50 neutral mark.
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New vehicle sales report positive growth in October 2019

  • Growth in new vehicle sales rose by 0.2%, up from a revised negative 0.9% (previously negative 1.1%) in September 2019. Growth in total new vehicle sales finally broke into positive territory after contracting for five consecutive months.
  • Click here to read more.

SA 2019 medium-term budget policy statement (MTBPS)

  • Much weaker fiscal picture than previously expected over the medium-term expenditure framework (MTEF) between FY19/20 and FY21/22 -> relative to February 2019 budget projections, budget-deficit-to-gross domestic product (GDP) is on average 2% wider and R99 billion higher in each year -> deficit staying above 6% of GDP up to FY22/23 -> primary budget balance (excluding interest payments) remains in deficit in MTEF period.
  • Click here to read more.

Credit growth ticked lower in August 2019

  • Growth in private sector credit extension rolled over to 6.9% in August 2019 from 7.2% in July 2019.
  • Household credit extension rebounded by 6.7% in August 2019, previously slowing slightly to 6.3% y/y in July 2019, while corporate credit extension slowed to 6.1% in August 2019 from 6.7% y/y.
  • Click here to read more.

PMI continued to decline in September 2019

  • The Purchasing Managers’ Index (PMI) for September 2019 deteriorated further to 41.6 index points from 45.7 reported in August 2019..
  • This is the closest the index has come to the 40.7-index point slump reported in August 2009. The PMI is now 6.5 index points shy from reaching the minimum of 35.1 index points..
  • Click here to read more.

Milder decline in new vehicle sales in September 2019

  • The growth decline in new vehicles sales slowed in September 2019 to 0.9% from a deeper 5.1% contraction in August 2019.
  • The third quarter of 2019 showed a deeper contraction in new vehicle sales to 3.2% from 2.2% in the second quarter.
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Unanimous decision to keep interest rates steady at 6.5%

  • The South African Reserve Bank (Sarb) Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged at 6.5% in its second last meeting for 2019.
  • The Quarterly Projection Model (QPM) previously projected a cut in the fourth quarter of 2020, but it has removed this after interest rates were reduced by 25 basis points to 6.5% in July 2019.
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FSCA guidance on sustainability of investments and assets regarding investment policy statement on retirement funds

  • We see ourselves as your partner in meeting your retirement funds’ fiduciary responsibilities.
  • The Financial Sector Conduct Authority (FSCA) sent out a guidance note on 14 June 2019, which makes the point that sustainability of retirement fund assets is prime in informing its investment policy statement.
  • Click here to read more.

Retail sales in July 2019 were weaker, but still positive

  • Growth in retail sales remained positive and rose 2.0% in July 2019, but was lower than the 2.4% reported in June 2019.
  • Seasonally adjusted retail trade sales slowed month on month (m/m) to 0.2% from 0.7% in June 2019.
  • Click here to read more.

Inflation surprises moderately to the upside in August 2019

  • The Consumer Price Index (CPI) for August 2019 ticked up to 4.3% up from 4.0% in July 2019, slightly above the Iress consensus expectation of 4.2%.
  • Core inflation also ticked up marginally to 4.3% in August 2019 from 4.2% in July 2019, signalling a gradual rise in underlying price pressures.
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Production growth slightly firmer in July 2019

  • The manufacturing sector contracted by 1.1% in July 2019 from a 3.6% contraction in June 2019. This was slightly below the negative 1.2% expectation by the Iress consensus.
  • Six out of the 10 manufacturing divisions detracted from the July print.
  • Click here to read more.

Business confidence slumps to its lowest level in 20 years

  • The Business Confidence Index (BCI) for the third quarter of 2019 plummeted to a 20-year low of 21 index points from 28 index points in the second quarter of 2019.
  • There was a deterioration in four of the five sub-indices, whereas three of the sub-indices had improved in the second quarter of 2019. All the sub-indices remained significantly below their historic median in the third quarter of 2019.
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New vehicle sales remained dreary in August 2019

  • Growth in new vehicle sales for August 2019 showed a deeper contraction of 5.1% from an upwardly-revised negative 3.8% decline in July 2019.
  • Passenger vehicle sales deteriorated by 7.6% from a wider negative growth rate of 8.2% in July 2019.
  • Click here to read more.

Credit momentum build-up in July 2019

  • The private sector credit extension number for July 2019 increased to 7.2% up from 6.9% in June 2019.
  • Corporate credit growth was still the main driver of the increase in the July 2019 number. The opportunities in renewable energy possibly explain the rise in corporate sector credit growth which expanded to 6.7%, up from 5.8%
  • Click here to read more.

August 2019 PMI resumes ebb and flow pattern

  • The Purchasing Managers’ Index (PMI) for August 2019 nosedived below the 50 neutral mark to 45.7 index points from a higher-than-expected print of 52.1 index points in July 2019.
  • There was a decline across the board in all the sub-indices except for the price sub-index.
  • Click here to read more.

National Treasury growth strategy proposals Will there be political will to implement?

  • National Treasury recently released an economic growth strategy discussion document highlighting the various reforms required to attain transformation in the South African economy through sustainable and inclusive growth, while maintaining global competitiveness.
  • TThe document outlines the policy interventions required through short-, medium- and long-term reforms to improve growth in the economy by 2% to 3% in the next ten years, while creating a million jobs.
  • Click here to read more.

2019 UN PRI assessment results

  • In 2006, Momentum Investments became one of the first United Nations-supported Principles for Responsible Investment (UN PRI) signatories in South Africa through the Momentum Outcome-based Solutions (Pty) Ltd and Momentum Asset Management (Pty) Ltd business licenses.
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Lower-than-expected electricity and water tariffs drive inflation to the bottom half of target in July 2019

  • Consumer price inflation (CPI) for July 2019 eased to 4.0% from 4.5% in June and came in lower than Bloomberg’s expectation of 4.3%.
  • Easing inflation in July was underpinned by a significant drop in transport prices, explained by a petrol price cut of 96 c/l.
  • Click here to read more.

Retail sales rebounded in the second quarter as June print edged higher

  • Retail trade sales increased by 1.1% in the second quarter of 2019 and the June 2019 print grew by 2.4%, relative to a year ago, marginally outpacing the Reuters poll of 2% and the May 2019 print of 2.3%.
  • Sales in five out of the seven retail divisions grew in June 2019. However, only three contributed significantly to the monthly print.
  • Click here to read more.

Production still prickly in June 2019 but enough for a growth rebound in the second quarter of 2019

  • Manufacturing production for June 2019 slumped by negative 3.2%, however growth in the second quarter rebounded to 0.6%.
  • Only four out of the ten manufacturing divisions grew in the second quarter of 2019.
  • Year-to-date growth in June reached a meagre 0.5%. More robust growth will be required in the second half of 2019 to surpass the annual growth number for manufacturing in 2018.
  • Click here to read more.

New vehicle sales slumped further in July 2019

  • Growth in new vehicle sales dipped further and contracted by 3.7% (previously contracting by 1.6% in June 2019).
  • The decline emanated from passenger vehicle sales which declined by 8.2% from a softer 3.2% contraction in June 2019, due to weak spend on durables amid consumers’ constrained purchasing ability.
  • Robust growth was recorded in July 2019 for extra heavy commercial vehicles of 31. 2%, previously growing at a meagre 1.3%.Buses showed a significant recovery to 24.7%, having previously contracted by 17.4% in June 2019.
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PMI breaches 50 neutral mark in July for the first time this year

  • The Absa/Bureau of Economic Research (BER) purchasing managers’ index (PMI) for July 2019 soared to 52.1 index points from 46.2 index points in June 2019, while the global PMI declined slightly further to 49.6 index points from 49.8 in the same period.
  • Three out of the five main sub-indices improved, with two expanding above the 50 neutral mark.
  • The business activity sub-index recorded a significant jump of 12.4 index points to 56.9 in July 2019, levels last seen in May 2017.
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Private sector credit extension lost further steam in June 2019

  • The June 2019 private sector credit extension lost further momentum to 6.9% from 7.7% in May 2019.
  • Corporate credit growth also slowed further to 6.1% in June 2019 from 8.4% in May 2019 and household credit growth inched higher to 6.2% from 6.1% in the same period.
  • The July 2019 repurchase rate (repo rate) cut by the South African Reserve Bank's (Sarb) Monetary Policy Committee (MPC) will likely induce modest growth in private sector credit extension..
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Jobs market remained depressed in the second quarter of 2019

  • The headline rate of unemployment jumped to 29% from 27.6% in the first quarter of 2019, showing persistence above the long-term average of 25.3%.
  • Formal non-agricultural sector employment shrunk by 49 000 in quarter-on-quarter (q/q) terms in the second quarter of 2019. However informal non-agricultural sector employment expanded by 114 000 q/q and 219 000 in year-on-year (y/y) terms.
  • The private household sector led with the most job losses, 49 000 jobs q/q in the second quarter of 2019, while the trade sector added 84 000 jobs q/q.
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The Sarb cuts repo rate by 25 basis points, but maintains a hawkish tone

  • Headline consumer price inflation (CPI) remained unchanged at 4.5% while core inflation inched higher to 4.3% in June 2019
  • The main contributors to headline inflation included housing and utilities, transport and food, which added 1.2%, 0.8% and 0.6% respectively in June 2019
  • Administered price inflation slowed to 6.9% (below the 7.1% average), driven by a softer contribution from fuel prices.
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The Sarb cuts repo rate by 25 basis points, but maintains a hawkish tone

  • The South African Reserve Bank's (sarb) Monetary Policy Committee (MPC) unanimously cut the repurchase rate (repo rate) by 25 basis points to 6.5% per annum on more-or-less balanced risks to a benign inflation outlook.
  • The average five-year ahead inflation expectation according to the Bureau of Economic Research's (BER) inflation expectations survey remained at its all-time low of 5.1% in the second quarter of 2019.
  • Headline core inflation forecasts were revised marginally lower in the near term on a reduction in the oil, fuel and electricity price assumptions, but medium term forecasts remain unchanged.
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Slight slippage in retail trade sales for May 2019

  • Growth in retail trade sales for May 2019 showed a slight deterioration to 2.2% from an upwardly revised 2.7% in April.
  • The momentum in retail trade sales waned and can be explained by the 54c/l increase in the petrol price in May.
  • Growth in May 2019 was significantly driven by general dealers that added 1.7%, followed by the food and beverages retailers that added only 0.2%.
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May 2019 production growth fails to expand faster

  • The manufacturing production growth print for May 2019 slowed to 1.0% from 4.3%, indicating a mild slowdown in growth momentum.
  • The production of food and beverages, textiles and clothing as well petroleum and chemical products contributed positively to the May 2019 manufacturing print. Year-on-year (y/y) growth detractors emanated from wood and wood products, motor vehicles and parts as well as basic iron and steel.
  • Global manufacturing production trends continued to deteriorate in the second quarter of 2019. The global purchasing managers' index (PMI) remained below the neutral mark of 50 for two months in a row. This was the first time that the index has contracted below the neutral mark since November 2012.
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Sona: Few new major reforms announced, but financial support to Eskom frontloaded and Sarb independence reaffirmed

  • The rand was little moved in reaction to the State of the Nation Address (Sona) as few new reforms were announced. A number of growth, job and investment initiatives were reiterated in relation to achieving the goals of the National Development Plan (NDP).
  • The president echoed the sentiment of the South African Reserve Bank (Sarb) on the dangers high inflation posed to the purchasing power of citizens and to the country’s relative competitiveness. Encouragingly, the constitutional mandate of the Sarb was reaffirmed.
  • Further detail on the unbundling of Eskom will be divulged at the medium-term budget policy statement in October 2019, but the president noted a “significant portion” of the allocated R230 billion to Eskom (for the next 10 years) would be brought forward to support the ailing energy utility in the near term.
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Inflation creeps higher to 4.5% in May in line with expectations

  • Headline inflation increased to 4.5% in May from 4.4% in April 2019, meeting market expectations captured by Bloomberg.
  • Nearly three quarters of the items in the consumer inflation basket (on a weighted basis) registered inflation below the upper end of the 3% to 6% inflation target, suggesting little sign of broad-based inflation pressure.
  • An uptick in food inflation is likely in the coming months, due to meat prices, which should increase on the back of the lifting of the export ban on beef, a reduction in slaughtering and higher tariffs on poultry imports.
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Production print for April 2019 indicates a mild supply-side recovery

  • Manufacturing growth in April 2019 surprised positively and grew by 4.6%, up from 1.3% in March 2019.
  • Growth in eight out of 10 of the manufacturing production divisions improved in April 2019, relative to only five production divisions improving in March 2019.
  • This improvement was largely attributable to the low base created in March 2019 and a restoration in electricity supply.
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Rosier retail trade sales print for April 2019

  • The retail trade sales print for April 2019 recorded at 2.4%, outperforming the Iress consensus expectation of 1.3% and the previous March 2019 print of 0.1%.
  • Sales growth for five out of the seven types of retailers expanded in April 2019, relative to only one out of seven in March 2019.
  • Growth in household expenditure has been subdued and reached the first negative print in 11 quarters in the first quarter of 2019, contracting by 0.8%.
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Tongaat Hulett - Not such a sweet deal (Retail) 

    As reported in the business and financial news, Tongaat Hulett Limited requested the Johannesburg Stock Exchange (JSE) and London Stock Exchange, where the company has a secondary listing, to suspend trading of its shares on 10 June 2019.

    Click here (retail) to read more.
    Click here (institutional) to read more.

PMI remains below neutral for the fifth consecutive month

  • The purchasing managers’ index (PMI) disappointed in May 2019 and deteriorated to 45.4 index points from 47.2 index points.
  • Manufacturing sentiment was likely undermined by weak domestic demand, as shown by the decline in the business activity and new sales orders sub-indices.
  • The employment, purchasing commitments and price sub-indices improved in May 2019.
  • Click here to read more.

First-quarter growth print a shocker

  • Real growth in gross domestic product (GDP) contracted by more than anticipated at 3.2% in quarter-on-quarter seasonally adjusted terms (% q/q saar) in the first quarter of 2019.
  • Nominal growth for the first quarter of 2019 was the weakest on record, which could impede government’s fiscal consolidation efforts in the short term.
  • From a supply-side angle, growth was weakest in the primary and secondary sectors of the economy, but pressure was evident in some of the services-orientated industries in the tertiary sector as well.
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New vehicles sales print disappoints for May 2019

  • New vehicle sales declined by 5.7% in year-on-year (y/y) terms in May 2019 from an upwardly revised 1.2% y/y expansion in April 2019 (previously recorded at 0.7%).
  • Passenger vehicle sales declined by 1.4% y/y and commercial vehicle sales contracted further by 12.6% y/y in May 2019, in line with depressed consumer and business sentiment.
  • The decline in new vehicles sales is underpinned by weak domestic demand in the economy and ongoing financial strain among households, visible in the rise of vehicle and asset finance defaults.
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Financial stability review: SA’s financial sector remains resilient

  • Global growth is projected to slow to 3.3% in 2019 from 3.6% in 2018 and is expected to recover to 3.6% in 2020. The growth outlook in South Africa (SA) remains constrained by electricity supply shortages, high unemployment, low business confidence and a lack of fiscal consolidation.
  • Global risk sentiment has rebounded, as a result of anticipated easier monetary conditions, following the dovish turn the Federal Reserve (Fed) and other key developed market (DM) central banks took since the last financial stability review in November 2018.
  • The International Monetary Fund (IMF) estimates outflows worth 0.5% of gross domestic product (GDP) would occur if Moody’s downgraded SA. This is based on the rating agency’s assessment of the R186 and R2023 bonds, but could be higher if total foreign investment in SA’s government bonds was taken into account.
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Consumer confidence picks up to five index points in the second quarter of 2019

  • Consumer confidence ticked higher to five index points from two index points in the first quarter of 2019.
  • Expected economic performance improved significantly relative to the high in the first quarter of 2018, possibly attributable to a stabilisation in electricity supply.
  • Expected financial conditions remained static between the first and the second quarter of 2019, with low meat inflation neutralising the rise in transport inflation.
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Some disappointments in the latest cabinet reconfiguration, but broadly positive overall

  • The number of ministries was reduced from 36 to 28 through merging some of the departments, but the number of members in cabinet remains high at 64.
  • Some appointments were disappointing, but many of the former president’s allies are no longer in government.
  • The latest cabinet reconfiguration signals a positive balance of power for the incumbent president and should be viewed as market positive if a clear willingness to support the president’s reform agenda is observed.
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Where will you take us, Mr President?

    When the global financial crisis hit in 2008, South Africa was sitting on reasonably strong macroeconomic fundamentals, including a healthier fiscal position and solid levels of business and consumer sentiment. The economy had grown by an average of 4.2% between 1999 and 2008, while the headline rate of unemployment had fallen to 22% under the presidency of Thabo Mbeki. Click here to read more.

Interest rates steady at 6.75%, but bias shifting towards a more accommodative stance

  • The South African Reserve Bank (Sarb) Monetary Policy Committee (MPC) kept interest rates steady at 6.75%.
  • Although the dip in inflation expectations for the next five years to 5.1% was welcomed by the Sarb, it noted the importance of structurally shifting expectations lower towards 4.5% for broader macroeconomic stability.
  • Click here to read more.

Inflation beats expectations and edges lower to 4.4% in April 2019

  • Headline inflation dropped to 4.4% in April 2019, beating expectations for a steady outcome of 4.5%. Core inflation dropped in line with the IRESS consensus to 4.1% from 4.4% previously
  • More than three quarters of the items in the consumer inflation basket recorded inflation below 6% in April 2019, confirming a lack of widespread inflationary pressure.
  • Click here to read more.

Weak momentum in retail sales for March 2019

  • Retail trade sales for March 2019 reported positive growth of 0.2%, from 1.4% recorded in February 2019.
  • Retail sales for the first quarter of 2019 slipped 0.7% relative to the last quarter of 2018.
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Employment numbers disappoint in the first quarter of 2019

  • The first quarter of 2019 experienced a rise in South Africa’s (SA) unemployment rate to 27.6% from 27.1%.
  • The construction sector cut jobs by 142 000 in the first quarter of 2019, followed by the community and social services sector, which shed 50 000 jobs.
  • Click here to read more.

The 2019 National Elections: The ANC secures 57.5% in the most hotly contested polls since 1994

  • The African National Congress (ANC) won 57.5% of the national vote (previously 62.2% in 2014), followed by 20.8% (previously 22.2%) by the Democratic Alliance (DA) and 10.8% (previously 6.4%) by the Economic Freedom Fighters (EFF).
  • Voter turnout disappointed at 66% for the national vote, which was most likely due to rising distrust in government. Voter turnout was highest in the more populous urban areas, including Gauteng (GP), the Western Cape (WC) and Kwa-Zulu Natal (KZN), but lowest for the North West Province (NW) and Limpopo (LP), which have larger rural voting bases
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Negative growth in mining and manufacturing for the first quarter of 2019

  • Manufacturing production volumes increased by 1.2% in March 2019 from 0.5% in February 2019 and recorded growth of 0.8% on a month-on-month (m/m) basis, which was an improvement from negative 2.0%.
  • Growth in the manufacturing sector declined in the first quarter of 2019, with seven out of the ten contributing divisions declining in this period.
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Gradual upward trajectory in consumer credit growth continues in March 2019

  • Total credit extension to the private sector grew by 6.1% in March 2019 relative to 6.0% in February 2019.
  • Consumer credit growth rose to 6.0% in March 2019, from 5.9%. Broad-based growth in the underlying consumer credit components could intimate a lower risk of distressed borrowing.
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SARB monetory policy review

  • Global growth decelerated more sharply than expected on a synchronised basis, which compelled the central banks within developed markets (DM) to postpone further monetary policy tightening.
  • Significant downgrades have been made to growth estimates in China and the Euro area. In addition, continued elevated uncertainty has dampened prospects for global growth.
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Retail trade sales print for February 2019 surprises posivitively, but remails weak

  • Statistics South Africa (Stats SA) released retail trade sales for February 2019, which recorded higher-than-expected growth of 1.1%. This was, however, lower than the 1.2% recorded in January 2019.
  • Four out of the seven types of retailers reported an increase in sales relative to a year ago, compared to five in January 2019, highlighting broader-based weakness.
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Inflation positively surprises consesnsus at 4.5% in March 2019

  • Headline and core measures of inflation rose to 4.5% and 4.4% in March 2019, positively surprising consensus expectations of 4.7% and 4.5%, respectively.
  • 70% of the items in the consumer inflation basket recorded inflation below 6% in March 2019, indicating little sign of broad-based inflationary pressure.
  • Click here to read more.

Underwhelming mining and manufacturing prints for February 2019

  • Manufacturing production volumes, as released by Statistics South Africa (Stats SA) for February 2019, grew by 0.6%, which was weaker than the 0.9% rate recorded in January 2019.
  • Six out of the ten sub-components in the manufacturing sector reported an annual contraction, relative to four in January 2019, highlighting broader-based weakness.
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No change to interest rates at 6.75% as SARB lowers growth and underlying inflation forecasts

  • The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) left interest rates unchanged at 6.75%
  • Although the dip in inflation expectations was welcomed by the SARB, it noted the importance of shifting expectations down towards 4.5% to ensure lower inflation and lower borrowing costs in the economy.
  • Click here to read more.

No major surprises as inflation rises broadly in line with expectations to 4.1% in February 2019

  • Headline and core measures of inflation broadly met market expectations in February 2019, with headline inflation rising to 4.1% and core inflation steadying at 4.4%.
  • 80% of the items in the consumer inflation basket recorded inflation below 6% in February 2019.
  • Inflation at the producer price level indicates upward pressure on bread and cereal prices, but downward pressure on meat prices, in the near term.
  • The Central Energy Fund and the Department of Energy are guiding towards a sizeable rise in the fuel price for April 2019.
  • The energy regulator has ruled on an above-inflation electricity tariff increase for financial year 2019/2020 (FY19/20) and FY20/21.
  • The South African Reserve Bank (SARB) is likely to keep interest rates steady at the upcoming interest-rate-setting meeting given muted confidence, subdued growth and within-target inflation.
  • Click here to read more.

Why deliberate outcome-based portfolio construction makes sense

    Since the Global Financial Crises, investors have been fortunate enough to experience an upward trending market in equities in the past 10 years. The average return of the South African equity market delivered more than 12% per year, which translated into a return of 7.3% per year above inflation in the last 10 years. Click here to read more.

Return expectations in a low-return environment

    The last decade has been a difficult time of falling real interest rates, as the world’s policy makers (especially central banks) have struggled to significantly increase economic growth rates after the global financial crisis (in 2008). For many major developed markets, interest rates have decreased into very low and even negative territory, while inflation has remained stubbornly low. Click here to read more.

Short-term investment outcomes – What to expect

    Short-term investment returns can often be different to what is expected, but Momentum Investments is here to guide investors in understanding the short-term outcomes and making sense of the risks involved. Often incorrect conclusions are made and, as a result, irrational investment decisions are actioned based on short-term returns. Researching and analysing investments and historical returns for a one-year period do not provide any reliable insight into a particular portfolio's prospects for performing well and delivering on certain predefined future investor outcomes. The reason is that one-year periods do not reveal enough about a portfolio’s ability to guide it through a full market cycle, which includes bull and bear markets. Click here to read more.

Changes to the strategic asset allocations of the Momentum Investments Factor Series portfolio

  • The review of the strategic asset allocations is to ensure robust outcomes for clients
  • Regulation 28 changes and amendments to the Pension Funds Act regarding global allowance
  • Change in forward-looking expected risk premia
  • Ensure maximum probability of delivering on client outcomes – risk and return
  • Click here to read more.

2018 SA equity market return in perspective

    The 2018 calendar year has been a particularly challenging period for local growth asset classes, which include the equity and property market. Global trade tensions, political uncertainty and rising oil prices further affected local sentiment and return delivery. SA fell into a recession during the earlier part of 2018, which dented sentiment and foreign flows, with the resultant effect being a relatively painful correction in equity markets, after a protracted bull market since the 2008 global financial crisis. Click here to read more.

2019 National budget review: Eskom financial support killing the green shoots of renewed fiscal prudence

  • The fixed income and currency markets shrugged off a wider-than-anticipated budget deficit projection and a higher debt ratio for the next three fiscal years.
  • A rising budget deficit and spending growth that outstrips revenue growth in the next fiscal year points to a slightly expansionary budget initially, which is marginally positive for the economy and somewhat profit-positive for the companies linked to the local economy. In the latter two years, the budget becomes contractionary, which bodes well for the bond market.
  • Treasury downwardly revised its growth assumption in response to a materialisation in negative growth risks.
  • Tax collections have disappointed by R15.4 billion in the current fiscal year due to a weaker economy, tax administration issues and an acceleration in value-add tax (Vat) refunds.
  • A tepid growth environment leaves fewer obvious additional revenue streams available to be tapped into. Little compensation for bracket creep and a further rise in sin taxes and fuel levies were announced.
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SA 2019 national budget (FLASH NOTE) - Eskom financial support killing the green shoots of renewed fiscal prudence

  • Initial impressions: Wider-than-expected budget deficit surprises negatively
  • Immediate market effect: Budget seen to be expansionary
  • Fiscal and debt targets missed: Main budget deficit to expand
  • Long-term spending commitments: Urgent need to address land reform
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2019 National budget preview: Parastatals’ pressing financial needs raise concerns over SA’s fiscal sustainability

  • Government is expected to reaffirm its commitment to efforts on fiscal consolidation and to reiterate the growth-enhancing measures, which were announced at the State of the Nation Address (Sona).
  • A downward revision to nominal growth forecasts is anticipated, owing to a sluggish growth environment and a positive downward adjustment in the inflation trajectory.
  • A revenue miss is likely given the year-to-date under performance of company and personal tax receipts.
  • A tepid growth environment leaves available fewer obvious additional revenue streams to be tapped. Limited compensation for bracket creep, higher fuel taxes and additional taxes on alcohol and tobacco-related products are likely avenues Treasury will take advantage of to boost revenue growth.
  • After an extended delay, the Carbon Tax Bill is expected to become effective from 1 June 2019.
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SARB cuts inflation forecasts aggressively, but suggests risks remain moderately tilted to the upside

  • The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) left interest rates unchanged at 6.75%.
  • Key focus areas for the SARB remain guiding surveyed inflation expectations closer to the midpoint of the 3% to 6% inflation target band and creating more flexibility in monetary policy, to deal with external shocks.
  • Downside risks to the SARB’s downgraded economic growth outlook remain a function of concerns of electricity supply, low domestic confidence levels and weaker export prospects. The size of the forecasted output gap remained unchanged for the near term, but is expected to turn positive in 2021.
  • Although the SARB lowered its inflation forecasts aggressively, it noted risks to the inflation outlook remained moderately to the upside. It warned that administered prices, rising domestic food prices, changing investor sentiment towards emerging markets (EMs), a moderation in global growth and volatile international oil prices were the key threats to forecast.
  • Click here to read more.

Economic outlook for 2019

  • World growth is expected to slow, but the recovery remains firm. The global economy is, however, becoming less synchronised, with a smaller share of economies expected to experience an uptick in growth in 2019.
  • Although a normalisation in monetary policy is well underway in the US and United Kingdom (UK), spare capacity and muted inflation expectations have suppressed the outlook for inflation in Japan and the Eurozone, preventing a faster unwind of accommodative monetary policy.
  • Growth in emerging markets (EMs) was spurred by a prolonged period of ultra-accommodative monetary conditions, but EMs are now vulnerable to a rise in borrowing costs and a potential reversal in capital flows.
  • Deep damage done by the previous administration has led to four consecutive years in which living standards have declined in South Africa (SA). A tepid growth outlook, further impaired by the rising threat of persistent electricity outages, point to little progress in eradicating poverty in the medium term.
  • The political realities of a fractious ruling party have stymied the pace of progress in SA. While government is working to fix some challenges, policy uncertainty in a number of areas has suppressed a recovery in confidence.
  • Click here to read more.

Financial market outlook for 2019

  • As long as the probability for imminent US recession remains low, as is indicated by a plethora of leading indicators, the early part of 2019 could still experience moderately positive equity returns and an outperformance of global equities over bonds, if history repeats itself. However, as the balance of probabilities start pointing to the onset of recession sometime from 2020, the outlook for global equities will likely deteriorate, as 2019 progresses.
  • If the global equity market could avoid a significant sell-off during 2019, improving SA equity fundamentals could provide investors with decent available returns from current attractive valuation levels.
  • SA nominal bond yields look about 1% cheap compared to US yields, while the forward-looking real SA bond yield of around 4% is also about 1% higher than the historical average real yield available to investors in the last 16 years, illustrating the relative attractiveness of the asset class.
  • Real cash returns are compelling relative to their own history, as well as to nominal and real bonds on a risk-adjusted basis.
  • Unless there has been some additional undetected questionable financial engineering among the main companies in the listed property sector, it is Momentum Investments’ view that the sector’s positive valuation underpin and some macro improvement in the SA economy point to strong return prospects.
  • Click here to read more.

Interest rate hike reflects the Reserve Bank’s intolerance for inflation expectations at the top end of the target

  • The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) hiked interest rates by 25 basis points, for the first time since March 2016, to 6.75%.
  • The SARB emphasised the need to create more flexibility in monetary policy to deal with shocks. The SARB aims to do this by leading inflation expectations closer to the midpoint of the 3% to 6% inflation target band.
  • The SARB’s near-term growth outlook has been revised lower, but forecasts in the outer years were little changed. The output gap is expected to narrow in the medium term, but will remain negative into 2020.
  • Click here to read more.

Slower-than-expected rise in October 2018 inflation print to 5.1%

  • Headline inflation surprised the market positively at 5.1% for October 2018.
  • Nearly three quarters of the items in the consumer inflation basket recorded inflation below the upper end of the 3% to 6% inflation target in October 2018.
  • Food inflation registered another positive downside surprise. Deflation continued in the bread and cereals category, while animal prices at the producer price level have indicated further downside in meat prices at the consumer level in the near term.
  • The Central Energy Fund and the Department of Energy are leading towards a sizeable cut in the fuel price for December 2018.
  • Click here to read more.

The South African Reserve Bank October 2018 Financial Stability Review

  • Global financial stability risks have intensified since April 2018.
  • The downward phase in South Africa’s (SA) business cycle is coinciding with a downward phase in the financial cycle, which exacerbates financial stability risks. However, the country’s financial sector remains resilient and the banks have held up well in stress tests.
  • The SA Reserve Bank (SARB) warned against four key risks, which include weaker global growth, low domestic growth, a faster-than-anticipated pace of policy tightening in developed markets (DM) and cybersecurity risks.
  • A desynchronisation of global growth has been amplified by rising protectionism, weaker commodity prices and idiosyncratic emerging market (EM) vulnerabilities.
  • Click here to read more.

Medium-term budget review: Tough balancing act between fiscal discipline and growth protection

  • The market responded negatively to a wider-than-anticipated budget deficit projection for the next three fiscal years.
  • A rising budget deficit and spending growth that outstrips revenue growth in the next two years point to a slightly expansionary budget, which is marginally positive for the economy, somewhat profit-positive for the companies, which are linked to the local economy, but detrimental to the South African bond market.
  • Click here to read more.

SA medium-term budget policy statement
(Flash Note) Click here to read more.

The global equity bull is not dead yet
Global markets continue to face uncertainty after the Dow Jones witnessed its third-largest one-day points drop in history late last week. Although markets corrected towards the end of last week, Asian markets experienced another dip on Monday and Saudi Arabia's market slumped significantly, based on fears that US President Trump may enforce sanctions on the kingdom following the disappearance of a prominent journalist. Click here to read more.

Medium-term budget preview: The challenge of lifting the country's growth potential without risking fiscal consolidation

  • The credible appointment of former Reserve Bank governor, Tito Mboweni, to the helm of the finance ministry has been well received by the market.
  • The weak performance of the economy in the first half of the year points to downward revisions to Treasury's growth assumptions.
  • Softer-than-anticipated domestic growth prints are suggestive of a likely undershoot of Treasury's tax collection targets.
  • Click here to read more.

Steinhoff International Holdings NV class action
We have decided to pursue claims on behalf of our clients and our pooled portfolios that held shares in Steinhoff International Holdings NV (Steinhoff) and suffered losses as a result of the collapse in its share price.Click here to read more.

Interest rates steady at 6.5%, but the balance of sentiment is shifting towards tighter monetary policy

  • The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) warned a materialisation of inflation risks may warrant a tighter monetary policy stance.
  • Sustained currency weakness, international oil prices and higher-than-expected electricity tariffs continue to pose an upside threat to the SARB’s headline inflation forecast.
  • Click here to read more.

Another positive inflation surprise for August 2018
Half of the items in the consumer basket, on a weighted basis, printed below 3%
According to Statistics South Africa (Stats SA), consumer price inflation (CPI) surprised the market positively and came in 0.3% lower than the consensus expectation for a 5.2% rise in August 2018. Click here to read more.

Responding rationally to rand and recession ructions
The reality of rand weakness and local recession
In recent months, the South African (SA) economy and financial markets have been continually buffeted by relentless rand weakness, with the local currency losing a quarter of its value since the inauguration of President Cyril Ramaphosa in mid-February 2018. Click here to read more.

Outcome-based investing reduces the risk to the drop in MTN’s share price

You may be aware that the business and financial news have been dominated by discussions and press releases around mobile telecommunications provider, MTN Group. The Central Bank of Nigeria (CBN) confirmed it had ordered MTN and four of its banking partners to bring US$8.1 billion back into the country. Click here to read more.

Interest rates steady at 6.5%, but a realisation of inflation risks leads to a hawkish stance

  • The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) warned against a materialisation of inflation risks.
  • Despite an upward revision to the SARB’s inflation projections, sustained currency weakness, international oil prices and higher-than-expected electricity tariffs continue to pose an upside threat to its forecast.
  • Click Here to read more.

June 2018 inflation print extends string of positive inflation surprises

  • A continuation of positive surprises in headline inflation relative to consensus estimates.
  • Consumer price inflation (CPI) came in lower than consensus expectations by 0.2% in June 2018.
  • Click Here to read more.

Momentum Income Plus Fund’s exposure to Basil Read

  • This document is to bring you up to date about the Momentum Income Plus Fund, which has exposure to Basil Read.
  • Click Here to read more.

May 2018 headline inflation beats expectations marginally at 4.4%

  • May 2018 inflation print positively surprises consensus.
  • According to Statistics South Africa (Stats SA), consumer price inflation (CPI) dipped to 4.4% in year-on-year (y/y) terms in May 2018.
  • Click Here to read more.


Revived inflation risks prevent an interest rate cut

Renewed upside inflation risks discouraged a further cut in interest rates
Despite little revision to the SARB’s inflation projections, a resuscitation in inflation risks informed the MPC’s decision to leave interest rates unchanged at 6.5% at the May 2018 rate-setting meeting
Click Here  to read more

April 2018 headline inflation increases on tax hike, but undershoots expectations

VAT increase raises inflation in April 2018
Consumer price inflation (CPI) appears to have bottomed in March 2018 at 3.8% in year-on-year (y/y) terms.
Click Here  to read more

Further communication regarding Steinhoff

Following the collapse in the Steinhoff share price in December 2017 caused by the announcement of alleged financial irregularities, the withdrawal of the audited financial statements for 2016 and 2017.
Click Here  to read more

A robust debate results in an interest rate cut to 6.5% 

Lower inflation forecasts and a moderation in inflation risks allowed for a cut in interest rates
A downward shift in the SARB’s inflation projections and a moderation in inflation risks triggered a decision to cut interest rates by an additional 25 basis points, to 6.5%, at the March 2018 interest rate-setting meeting.
Click Here to read more.

Moodys - 24 March 2018
Moody’s favourably reverses South Africa’s credit rating outlook from negative to stable

  • Moody’s kept South Africa’s (SA) foreign and local currency rating unchanged at Baa3, in line with expectations, which left the country eligible for inclusion in the Citigroup World Government Bond Index (Citi WGBI).
  • The favourable credit rating outlook reversal from negative to stable was unlikely fully priced in by markets.
  • Click Here to read more.

February 2018 headline inflation surprises positively
Near-record share of inflation basket tracking below 6%

Consumer price inflation (CPI) dipped to 4.0% in
year-on-year (y/y) terms in February 2018 from 4.4% y/y
in January. Click Here  to read more.

Growth surprised positively in the final quarter of 2017
Bounce in agricultural production benefited growth in the primary sector, despite a contraction in mining
Growth in gross domestic product (GDP) surprised
considerably to the upside in the final quarter of 2017. Click here  to read more,

Budget review - 22 February 2018
2018 National budget review: Tackling the fiscal wounds

The contractionary nature of the budget is expected to steer the country towards a more sustainable fiscal trajectory.
Click here to read more.

Budget flashpoints - February 2018
SA national budget 2018 (FLASH NOTE)

Initial impressions: Improvement relative to Treasury’s October 2017 projections.
Click here to read more.

Further ease in headline inflation
Nearly 80% of the items in the inflation basket are tracking below 6%

Stats SA (South Africa) announced a drop in consumer price inflation (CPI) from 4.7% in December 2017 to 4.4% in January 2018.
Click here to read more.

2018 National budget preview: Testing government’s fiscal mettle
Faster fiscal deficit reduction in the medium term is possible

A further slide in business and consumer confidence in the domestic economy led to a significant deterioration in National Treasury’s macroeconomic forecasts in the October 2017 medium-term budget policy statement.
Click here to read more.

2018 State of the nation address: Challenges acknowledged, but hopes raised for a economic overhaul
Addressing the unemployment challenge
Within the next few months, President Ramaphosa is expected to convene a Jobs Summit, focusing on increasing productivity, exploring what is needed for companies to invest on a larger scale, equipping workers and expanding infrastructure. Click here  to read more.

Momentum Investments’ equity benchmark
Momentum Investments continually contemplates the appropriateness of the opportunity set and benchmarks used in the client’s solutions to achieve the desired outcome of the client. 
Click here to read more.

Interest rates maintained at 6.75%, but macro trends suggest room to ease in upcoming months
Downgrade potential and volatile oil prices are viewed as the main risks to setting monetary policy

In light of lingering sovereign rating downgrade risks and a recent sharp uptick in international oil prices, the South African Reserve Bank (SARB) prudently decided to leave local interest rates unchanged at 6.75% at its January 2018 Monetary Policy Committee (MPC) meeting. 
Click here to read more.

Economic outlook for 2018
  • The stage looks set for a continued, broad-based expansion in the world economy in 2018.
  • Falling unemployment, diminishing output gaps, reduced deleveraging pressures, more supportive fiscal policies and well-behaved inflation is expected to boost many developed markets, despite a gradual removal of the monetary stimulus punchbowl, while improving fundamentals and firmer global trade should further contribute to a stabilisation in emerging markets.
  • Though good news is expected to continue on the economic front, political instability could create some turbulence in the global economy.
  • Meanwhile, in South Africa (SA), the extent of the anticipated growth recovery in 2018 and the outlook for sovereign ratings will depend on whether the newly-elected leadership will adopt and enact policies to enhance the country’s creditworthiness or if an economic stalemate will be reached between the two political camps vying for power within the divided ruling party.
  • Please click here to read more

Financial market outlook for 2018
  • Fundamentals and valuations should continue to support the outperformance of global equities over bonds in 2018.
  • Equity markets in Europe, Japan and emerging markets are preferred to the United States.
  • Local political change and policy reform could eradicate the SA equity market risk premium.
  • The SA bond and listed property outlooks are dependent on the global carry trade and the local political outcome.
  • Please click here to read more

Your money is safe with us
Momentum Collective Investments Customers, please click here to read more.
Momentum Investments Factor Series Customers, please click here to read more.

We raised R166 000 at our ninth annual charity golf day!
On 30 November 2017, Momentum Investments hosted its ninth annual charity golf day at De Zalze Winelands Golf Estate. Our investment managers, banking and asset-origination partners were invited, and they opened their hearts and wallets to contribute to a great cause. Click here to read more.

No ratings bargains for South Africa on Black Friday
One notch downgrade by S&P, while Moody’s placed the country on review for downgrade

Two out of the three key rating agencies left SA’ sovereign credit rating on hold. Click here to read more.

Interest rates unchanged amid elevated uncertainty
Highly uncertain environment and balance of risks keep interest rates unchanged at 6.75%

The South African Reserve Bank (SARB) exercised caution at its November 2017 Monetary Policy Committee (MPC) meeting, noting the high degree of political and economic uncertainty left the committee with a unanimous vote to leave interest rates unchanged at 6.75%.  Click here to read more.

Inflation continues on its downward trajectory in October 2017
Majority of the items in the inflation basket are tracking below 6%

Consumer price inflation (CPI) edged lower to 4.8% in year-on-year (y/y) terms in October 2017, from 5.1% in September, registering broadly in line with the market’s and Momentum Investments’ expectations. Click here to read more.

SA medium-term budget 2017 (FULL REVIEW)
Has SA reached the fiscal cliff?

Budget negative for bonds and the currency, but equities rallied after the announcement
In an immediate reaction to the budget announcement, the SA rand tumbled by 1.6%, while SA bond yields (R186) sold off by 18 basis points. Click here to read more.

Medium-term budget preview: Walking the fiscal tightrope to avoid adversely affecting growth, while healing SA’s public finances
National Treasury faces difficulties in plugging the revenue gap in a slow growth environment

Since the tabling of the national budget in February 2017, downside growth risks to the domestic economy have materialised.  Click here to read more.

Reserve Bank disappoints the market by keeping the repo rate unchanged – 22 September 2017
Interest rates kept on hold at 6.75% due to heightened uncertainties

Momentum Investments, together with the majority of the economists polled by the Reuters survey, expected a 25-basis point cut in interest rates at the September 2017
meeting, based on the expectation of a favourable inflation trajectory, soft business and consumer confidence and limited negative currency movements, despite lingering domestic political and sovereign ratings risks. Click here to read more.

August 2017 headline inflation prints below consensus – 20 September 2017
Smallest share of the inflation basket exceeding the top end of the target band since 2009
Consumer price inflation (CPI) ticked higher to 4.8% in year-on-year (y/y) terms in August 2017, which was below the market’s and Momentum Investments’ expectations. In addition to the usual monthly surveys, 19% of the
basket (including municipal assessment rates and television licences) was surveyed.  Click here to read more.

Sharp (but expected) drop in July 2017 headline inflation
Inflation moves closer towards mid-point of target band

Consumer price inflation (CPI) plunged to 4.6% in year-on-year (y/y) terms in Stats SA’s July 2017 inflation print, from 5.1% y/y in June, meeting the market’s and Momentum Investments’ expectations. July is a relatively high survey month.  Click here to read more.

SA interest rates cut sooner than anticipated – 21 July 2017
Interest rates cut by 25 basis points to 6.75%

The South African Reserve Bank’s (SARB) interest rate decision was not in line with the Reuters consensus, in which 24 out of the 27 analysts surveyed predicted that the SA repo rate would remain steady at 7.0%. Click here to read more.

June 2017 headline inflation drops to 5.1% in line with expectations – 19 July 2017
Inflation in nearly two thirds of the inflation basket is tracking below the upper 6% band of the inflation target

Headline inflation measured by the consumer price index (CPI) drifted lower to 5.1% in year-on-year (y/y) terms for June 2017 from 5.4% previously, meeting the market’s and Momentum Investments’ expectations.  Click here to read more.

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. 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 expectation Click 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)...
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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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