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Standard Bank Group
The SA Daily 06 August 2019

Financial conditions sounder

  • The Standard Bank Financial Conditions Index retreated again, to -0.30 in June, from -0.16 in May. Still, financial conditions improved to -0.17 in 2Q19, from -0.38 in 1Q19. At -0.27 year-to date, conditions are now better than -0.54 last year as well as significantly sounder than the -2.1 average for 2009 during which real economic activity, as measured by GDP, contracted 1.5% y/y.
  • After the recent 25 bps interest cut by the SARB and with inflation still benign, we’d expect financial conditions in 2H19 to ease, and more so in 2020. Sustained reasonable growth in household credit and a rand recovery, per our forecast of R14.00/$ by end-2019/20, should also support financial conditions.
  • Financial conditions should further benefit from the mooted policy interventions to boost growth, create jobs and improve the fiscal prognosis, all of which should support the JSE All-Share Index. That would encourage wealth, boost consumer purchasing power, and prop up real fixed investment.
  • However, government policy interventions remain, mostly, outstanding and also most urgently needed. 

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