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The Citizen
a day ago
- Business
- The Citizen
Weekly economic wrap: politics dominate, lower inflation expectations
Between fears of how the economy will react to the DA-ANC tensions and the US' new bill and tariffs, inflation expectations decreased. Politics dominated the economic news this week, with local and global politics taking centre stage, while a South African survey on inflation expectations had good news for consumers from all the groups surveyed. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER) points out that while tensions persisted in South Africa between the DA and ANC, international headlines were dominated by the passage of the 'Big Beautiful Bill' in the US and the fast-approaching US tariff deadline. Bianca Botes, director at Citadel Global, says gold gained, while oil slipped as fiscal and trade risks weigh on commodities. 'Gold advanced to around $3,330/ounce, maintaining a solid position due to lingering uncertainty, even in an improved-sentiment environment. 'The US Tax-and-Spending bill's anticipated $3.3 trillion-plus impact on the deficit, along with the risk of new tariffs, bolstered gold's appeal.' ALSO READ: Policy Uncertainty Index drops slightly while global and local uncertainty remain Oil markets and the rand trending lower She says oil markets, on the other hand, are trending lower, with Brent Crude falling to approximately $68.50/barrel. 'Market sentiment was shaped by speculation that the expanded Organization of the Petroleum Exporting Countries (OPEC+) may increase output at its upcoming meeting, adding to downward pressure. 'Nonetheless, medium-term forecasts remain positive, with some analysts expecting higher average prices in 2025 due to persistent supply constraints outside OPEC and steady demand growth. However, geopolitical factors remain in play, particularly US sanctions on Iran, which added a layer of uncertainty to the global supply picture.' The rand kept surprising economists, strengthening to around R17.50/$, its strongest level since late 2024, supported by a declining dollar, elevated gold prices and improving local political sentiment. 'While the rally has been encouraging, the rand's outlook remains sensitive to both domestic developments and broader commodity market dynamics.' Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, say the rand was buoyed by higher global risk appetite this week, firming to its strongest level since the second week of November, trading at R17.60 on Friday afternoon. ALSO READ: Inflation expectations almost at four-year low Inflation expectations looking good De Schepper says according to the BER's inflation expectations survey, expectations declined across the board in the second quarter, with the inflation expectations of all three social groups, (businesspeople, trade union representatives and analysts) decreasing, with the downward adjustment extending across the forecast horizon. On average, the respondents expect that headline consumer inflation will be 3.9% during 2025, then rise gradually to 4.3% in 2026 and 4.5% in 2027. The inflation expectations of households for the next 12 months decreased to 5.4%, from 5.7% before. This is the lowest rate since the fourth quarter of 2021. 'The moderation in expectations not only firms up the likelihood of a 25 basis points rate cut in July but should also support the South African Reserve Bank's (Sarb) desire to shift to a lower inflation target. Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say the household experience of inflation is determined by spending patterns. 'While lower-income households will be more affected by food, higher-income households will be more sensitive to transport and insurance costs. That said, higher household expectations reflect the nuances beyond headline inflation readings. 'This is a dynamic that will also affect how quickly the Sarb is able to efficiently and sustainably achieve a lower inflation objective. High administered inflation may need to be compensated for by further non-admin core disinflation, which suggests less monetary policy easing. That said, the efficacy gains from a credible central bank and effective communication cannot be overlooked.' ALSO READ: Absa PMI increases but in contractionary territory for eighth consecutive month PMIs a mixed bag again The Absa Purchasing Managers' Index (PMI) increased by 5.4 points in June to reach 48.5, the second-highest reading this year and the largest monthly increase since September 2024, although it remains below the neutral 50 points. The S&P Global PMI, on the other hand, decreased by 0.7 points to 50.1 in June. While it remains in expansionary terrain, the underlying data showed output and new business declines, De Schepper points out. Furthermore, she says, the forward-looking confidence index slipped to its lowest level in four years. 'The divergence between this index and the Absa PMI could reflect survey timing: the Absa survey was conducted after the end of the 12-day war between Isreal and Iran and amid a lull in global tariff news, while the S&P survey was fielded during the final two weeks of the month and likely captured more of the lingering uncertainty.' Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say the good news in the Absa PMI is that new sales orders surged by 7.8 points, driven mainly by domestic demand. 'Despite stronger demand, production declined slightly, and supplier delivery times lengthened, likely due to increased activity rather than supply issues.' ALSO READ: New vehicle sales finish first half of 2025 on a noteworthy high New car sales keep increasing Naamsa reported that new vehicle sales increased by 18.7%, slightly down from 22% in May, with sales increasing for a fourth consecutive quarter. Exports also bounced back with 7.9% growth from a 14.6% contraction in May. Nkonki and Matshego say new vehicle sales surprised on the upside in June, much higher than their forecast of 14.3%. They noted that imported models outperformed those produced by local OEM's, reflecting heightened price sensitivity among consumers given still-tight household budgets. 'The broader recovery in vehicle sales is supported by subdued inflation, better credit conditions and the 100-bps drop in interest rates. However, the outlook is tempered by soft business confidence and lingering uncertainty around trade policy. Still, the industry should benefit from a more supportive macroeconomic backdrop heading into the second half of the year.'
The Citizen
5 days ago
- Politics
- The Citizen
Ramaphosa acted ‘justifiably' in removing Whitfield, says SACP
The DA has been criticised for its 'empty' threats against the ANC. The South African Communist Party (SACP) has defended President Cyril Ramaphosa for firing former trade and industry deputy minister Andrew Whitfield. Whitfield's dismissal has caused turbulence in the government of national unity (GNU), with the DA threatening to boycott the upcoming National Dialogue and several budget votes. The party did not rule out supporting a motion of no confidence against Ramaphosa. Speaking to The Citizen over the weekend, SACP spokesperson Mbulelo Mandlana said Ramaphosa acted within his rights as head of state. 'The DA's argument is flawed because it assumes the president shouldn't fully act as head of state to censure wrongdoing. The ultimatum reflects the DA's lack of commitment to government rules and regulations. 'The president acted justifiably in removing the deputy minister,' he said. Criticism of the DA-ANC marriage Mbulelo said the DA's reaction is problematic to the GNU and its partners. 'The DA's orientation in the GNU is not cooperation, it is to gain short-term political advantage at the expense of government efficiency, which should serve the people over the DA's interests,' he said. Mbulelo said the SACP has always maintained that the formation of the GNU in its current form was ill-advised. 'The SACP has consistently opposed the GNU, calling it ill-advised, ideologically problematic, and detrimental to our progressive political agenda. 'We've also criticised its recent budget and processes that put the working class in danger,' he said. DA responds to tripartite alliance attacks On the other hand, DA spokesperson, Willie Aucamp told The Citizen that the party is committed to the statement of intent that all parties inside the GNU signed. 'The DA has, in all our actions, honoured the Statement of Intent that was signed when the GNU was formed, whilst the ANC on numerous occasions did not honour this agreement. 'It is thus the DA that is committed to the GNU, with the ANC that is constantly showing their disregard for the GNU and its largest partner in this coalition government of national unity,' he said. Aucamp said the DA will continue using its positions in the GNU to improve the lives of South Africans, despite criticism from the ANC and its alliance partners. 'The SACP has, from day one, been opposed to the DA's presence in the GNU. They have tried everything to discredit the DA and the enormous positive role that the DA plays within the GNU. 'The DA is committed towards fighting corruption. If the president, the ANC, and their partners such as the SACP does not want to fight corruption, the DA will take over that responsibility,' he said. What will happen to the GNU? Meanwhile, ANC secretary-general, Fikile Mbalula, told reporters on the weekend that the party is fully behind the decision to fire Whitfield. 'We are behind the president, and we are not moved by any threats,' he said. The ANC's National Working Committee (NWC) is also expected to discuss the latest threats by the DA in a meeting this week. Political analyst, Ntsikeleo Breakfast, believes that the DA will not walk out of the GNU despite the exchange of threats with the ANC. 'The funders of the DA will be unhappy if they leave the GNU. The GNU is not a brainchild of the ANC or the DA. We have heard both parties say they will never work with each other. Like I said, he who pays the piper calls the tune; these people are funded,' he said. NOW READ: 'Greatest political mistake': Steenhuisen says Ramaphosa firing Whitfield was a 'calculated assault'
