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Silver Linings


Silver Linings

New record for manufacturing sales

South Africa's manufacturing sector is ending 2023 on a high note, with November's total sales figure of R314 billion representing a new monthly record, both in nominal and real terms. During the first eleven months of 2023, nominal year-on-year sales growth of 10% was recorded, well above the average inflation rate of 6%. Food and beverage processing represents the largest of the manufacturing divisions, accounting for more than 22% of total manufacturing sales. It remains a boon to South Africa to enjoy a large measure of food security, with an agriculture sector that is a significant generator of foreign exchange earnings, whilst also playing a key role in the return to price stability after the supply-side shocks of 2020 to 2022.

2023 records another trade surplus

Data released by SARS at the end of January confirms a new record for total exports, breaking the R2-trillion mark for the second successive year and assisting another annual trade surplus - the eighth year in succession. The R1-trillion level for exports was surpassed in 2015 and, thanks mainly to a 31% increase in export earnings in 2021, a doubling of this level was achieved in 2022 and again last year. The chances of maintaining solid export growth in 2024 have improved considerably, with the prices of coal, iron ore and platinum having increased significantly from their pre-Covid levels. With the two most populous countries in the world, India and China, destined to expand spending on infrastructure, prices for metals and minerals are bound to continue rising.










Inflation declines further

Following the recent lull in the pace of retreat of the consumer price index (CPI), inflation has now returned to a downward trajectory, both in terms of consumer prices and producer prices. The December reading of Statistics SA's CPI data sees consumer inflation down to 5.1 (from 5.5% in November and 5.9% in October). The producer price index, which invariably acts as a leading indicator for consumer prices, has set an even better tone, with the latest reading of 4% suggesting that inflationary trends will continue to moderate into 2024. More good news for indebted property owners is the welcome decline in South Africa's long-term bond yield, which could be indicative of an imminent turning point for mortgage bond rates. Since early October last year, the 10-year bond yield has shed more than 125 basis points - a clear indication that international capital markets are pricing in a lower interest rate scenario for South Africa in 2024.

Capital formation back on track

Capital formation seems to have decisively turned the corner after the debilitating effects of state capture and the Covid pandemic. Not only does this key demand-side indicator add value to the economy during the implementation stages, but it also facilitates future growth by virtue of expanding the country's productive capacity in all sectors. At a level of more than R270 billion during the 3rd quarter, gross fixed capital formation was 6% higher than a year ago (in real terms) and has been boosted by significant levels of new investment in machinery and equipment. 

Author Dr. Roelof Botha
Published 12 Feb 2024 / Views -
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