The SA Daily
17 April 2019
Fuel prices too a drag
- CPI inflation for March and retail sales for February are due out today. We expect inflation of 4.6% y/y (4.1% y/y in February) due to base effects and higher fuel prices. Retail sales growth likely moderated in February. This, alongside poor production data, corroborates our forecast of a 1.0% q/q (saar) contraction in GDP growth for Q1:19.
- Sales growth likely moderated to due declining nominal labour-income, depressed sentiment, and higher fuel prices. Still, this should be somewhat counteracted by reasonably benign inflation, growth in household credit uptake by households with healthy balance sheets, and gradually loosening financial conditions.
- February to April, petrol prices (93 and 95 Octane) rose by a cumulative R2.12/l and R2.15/l respectively. In this time, business and SA confidence generally slipped further. Higher fuel and higher electricity prices impinge on household disposable income, which discourages spending as well as crimp corporate profits. All this diminishes production — which drags down economic activity. Still, we’d foresee fuel prices subsiding in H2, premised on the intended oil supply increase by both Russia and OPEC as well as our constructive rand outlook.
- Our constructive rand outlook relies on economic reforms after the SA elections in May. We also still see interest rates held steady. A rate cut would be quite unlikely until inflation expectations have settled, anchored at the 4.5% midpoint of the SARB’s inflation target range.
Read PDF