Various global and domestic real economic activity data gave financial markets last week a welcome boost. On the heal of the favourable USA job data the previous Friday, better than expected company earnings in the USA, and good growth prospects for China turned market sentiment to the good. The S&P 500 index in the USA reached record levels a few time during last week. Share markets in Europe, The UK and the Far East also were stronger. Locally the All Share Index (ALSI) on the JSE increased for six days in a row since the previous Friday. The Index ended the week more than 1800 points higher (3.5%). The Top 40 index increased by 3.4% whilst the Financial index gained 4.2% over the week. The Industrial index was 2.7% and the Resources 20 index 5.5% stronger than a week ago.      

Domestic economic factors more and more are starting to show that the South African economy had reached its lowest turning point and that it is at a brink of an economic upturn. The three leading real indicators suggesting a turning point are the strong increase in real exports of 18% during April and the better than expected increase in manufacturing output by 4.0% and retail sales growth of 4.5% both during May. Together with this strong recovery commodity prices also recorded strong increases. Over the last month gains in the prices for gold (6.6%), platinum (10.3%), silver (22.8%) and copper (4.8%) together with a sharp increase in foreign demand for South African Bonds had shown that the economy is on a recovery path.   The effect of the above was that the Rand exchange rate recovered quickly.

The Rand exchange rate has appreciated during the current month to date with 3.5% against the Dollar, 3.9% against the Euro and with 4.8% against the Pound.

The effects of this strong improvement in the Rand on the consumer are threefold:

• A sharp decrease in fuel prices are expected at the beginning of Augusts (See underneath);
• Further decreases in the inflation rate to levels lower than 6.0% are expected. Especially prices for  food imports should subside; and
• Further increases in interest rates become more and more unlikely and a possible decrease during next year is now a possibility.

The coming week
Locally this coming Wednesday South Africa’s inflation rate for June will be announced. The expectations are that the rate will be around 6.1%, the same as recorded for May. The meeting of the Monetary Policy Committee (MPC) of the Reserve Bank also takes place starting on Tuesday. The MPC will announce its decision on interest rates on Thursday. It is expected that the repo rate will be unchanged.

On the international front the USA will publish various housing data during this coming week. The UK will release its inflation rate for June on Tuesday, whilst Russia will publish its unemployment data for June. Wednesday the UK will release its latest (June) unemployment rate. Thursday Japan will publish its industrial activity index for May, whilst the UK will release its latest retail sales data (June). The US will also publish its weekly jobless claims data as well as the manufacturing index for July.  The EU will announce its important decision on interest rates at a press meeting Friday China will release its latest business confidence index, whilst the UK, Germany, The USA and the EU will publish their purchasing manager’s indices (PMI’s) for manufacturing during June. Canada will also announce its latest inflation rate (June) as well as releasing its retail sales data for May.

The fuel price The average unit over/under recovery for the period 1/07/2016 – 7/07/2016 was:

Petrol 95: 82 cents per litre over recovery
Petrol 93: 80 cents per litre over recovery
Diesel:    45 cents per litre under recovery

Over recovery means the fuel price should decrease. . The adjustment to the fuel prices will be activated by the end of the month.