Weekly economic wrap: rand had a remarkable week but gold slips
The rand showed its resilience, coming back from trading close to R20/$ last week to trading closer to R19/$ today.
It was a quiet week on the local economic front, but the rand had a remarkable week, although most of the factors that supported the rand made the gold price slip.
Lisette Ijssel de Schepper, chief economist at the Bureau for Economic Research (BER), says the rand exchange rate had a remarkable week, trading about 2% stronger against the dollar, euro and pound by Thursday compared to last week.
'While it is always difficult to pinpoint the exact driver, it is typical of the rand to increase sharply (it was trading near R20/$ this time last month) and then recover at a rapid pace too. A sustained streak of capital inflows in South Africa's equity market helped, with non-residents being net buyers of South African shares for the longest streak since August 2022.'
However, De Schepper notes that despite inflows, the JSE ALSI closed 0.8% lower compared to a week ago.
Bianca Botes, director at Citadel Global, says emerging market currencies, including the rand, also beneffited from the improved global outlook.
'The rand approached one-month highs, driven by improved global sentiment and risk appetite, while supported by positive domestic developments such as Eskom's assurances on power supply and new government economic initiatives.'
'The rand is trading 1.15% stronger against the greenback for the week and is up 1.86% against the euro and 1.74% against the pound.' The rand was trading at R18.26 on Friday afternoon.
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Gold slips due to trade optimism, while oil advances
Meanwhile, gold prices slipped for a third straight session overnight, dropping to around $3,290/ounce as risk appetite improved on the back of trade optimism, Botes says.
'The prospect of easing US-China tensions and the new US-UK agreement reduced demand for safe-haven assets. The Fed's decision to keep interest rates steady, coupled with warnings about inflation and unemployment risks, reinforced a cautious policy outlook. Even with recent declines, gold was still set for a weekly gain, reflecting ongoing investor caution amid a complex global backdrop.'
Botes points out that Brent crude prices edged higher on Friday, approaching $63/barrel and building on the previous day's momentum.
'The market found support from renewed optimism surrounding upcoming US-China trade negotiations, with investors hopeful that progress could be made between the world's top two oil consumers.'
'The announcement of a US-UK trade deal further lifted sentiment, while a sharper-than-expected decline in US crude inventories earlier in the week provided an additional boost. Despite these positives, oil's advance was tempered by concerns over the expanded Organisation of the Petroleum Exporting Countries, OPEC+'s plans to increase output, ongoing uncertainty about the US economic outlook, and speculation that a US-Iran nuclear deal could bring more supply to the global market.'
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The sad story of manufacturing production
According to Statistics SA, factory output declined by 0.8%, which was better than the 3.2% drop last month, but it was the third consecutive decline and lower than the 0.8% growth consensus forecast.
Nkosiphindile Shange, economist at the BER, points out that the biggest drag came from a 2.5% drop in petrochemicals (-0.5%) and the electrical machinery subsector (-12.2%).
'Output fell by 2.3% in the first quarter as seasonally adjusted monthly production came in below expectations and declined by 2.2% in March 2025 compared to an expected 0.4% growth. The drop in April's Absa PMI, released last Friday, does not bode well for a strong start to the second quarter.'
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S&P Global South Africa PMI improves after four months of contraction
The S&P Global SA PMI increased from 48.3 points in March to 50 points in April as output and new orders ticked up for the first time in five months. Shange says robust sales in the services sector supported the increase in activity, while there were modest upturns in the trading and construction sectors.
'Manufacturing declined in line with the Absa PMI tracking the factory sector specifically, and due to currency weakness, input price pressures increased.'
Isaac Matshego and Busisiwe Nkonki, economists at the Nedbank Group Economic Unit, agree that the manufacturing sector continued to struggle in March.
'The rate of decline in manufacturing output at least moderated from a sharp 3.2% in February to 0.8% in March.'
'The weakness was widespread, but the sharpest declines occurred in petroleum, chemicals, rubber and plastics as well as electrical equipment. Over the quarter, the sector contracted by 2.3%, a sharper decline than in the final quarter of 2024 (-0.9%).'
'This means that manufacturing will again be a drag on GDP. Despite less severe load shedding and marginal gains at the ports, subdued domestic and global demand has led to ample spare capacity and weak commodity prices. These circumstances, within the context of high operating costs, have weighed on the industry's output.'
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Increase in new vehicle sales
New vehicle sales increased by 11.9% in April, after rising by 13.3% in March. Passenger vehicles increased by 16.9% to 30 101 units. Car rental sales accounted for 8.9% of passenger vehicle sales. Total commercial vehicles rose by 1.3% after 13 consecutive months of contraction.
Sales of light, medium and heavy commercial vehicles all increased, with only extra-heavy vehicles and buses contracting. Total exports fell by 6.6% or 2 266 units. Passenger vehicle sales fell by a sharp 32.9% after growing by 7.1% in March.
Commercial vehicle exports also declined by a smaller margin of 1.4%. According to naamsa, the poor export performance was due to the closure of a major Original Equipment Manufacturer (OEM) for most of the month. The OEM shut down to upgrade the facility to manufacture a new mode, Matshego and Nkonki say.
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