south african economic indicators november 2011

© 2011 Trade Intelligence

South African Economic IndicatorsNovember 2011


Index

Economic Growth (GDP)3

Exchange Rate5

Input Prices

7

Inflation

13

Interest Rates

18

Employment

20

Household Debt22

Consumer Confidence24

Retail Sales

26

Market Overview


Fig 1: GDP GrowthUpdated 01 December 2011

Market Overview

Source: StatsSA

Q1/

01Q

2/01

Q3/

01Q

4/01

Q1/

02Q

2/02

Q3/

02Q

4/02

Q1/

03Q

2/03

Q3/

03Q

4/03

Q1/

04Q

2/04

Q3/

04Q

4/04

Q1/

05Q

2/05

Q3/

05Q

4/05

Q1/

06Q

2/06

Q3/

06Q

4/06

Q1/

07Q

2/07

Q3/

07Q

4/07

Q1/

08Q

2/08

Q3/

08Q

4/08

Q1/

09Q

2/09

Q3/

09Q

4/09

Q1/

10Q

2/10

Q3/

10Q

4/10

Q1/

11Q

2/11

Q3/

11

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2.9%

2.1%

1.0%

3.1%

4.5% 5.

4%4.

3%3.

9%2.

7%2.

2% 2.5% 2.8%

6.1% 6.3% 7.

2%3.

6%5.

1%5.

2%5.

1%4.

5%6.

2%6.

2%4.

8%6.

0%5.

5%3.

7% 4.5% 5.

4%1.

7%4.

9%0.

2%-1

.8%

-7.4%

-2.8

%0.

9%3.

1%4.

8%2.

8%2.

7%4.

5%4.

5%1.

3%1.

4%

2008/2009 Recession

Period of recovery

Double dip?

Boom periodEconomic Growth (GDP)


Market Overview

COMMENTARY• GDP ticked up slightly from 1.3% in Q2 of 2011 to 1.4% in Q3 2011, coming in at lower than

expected• Growth forecasts for the rest of the year have been revised downward even further to 3.0%,

and in some cases even lower

The persistent climate of stagflation currently being experienced in South Africa means the country is slipping closer and closer to a point where activity could border on a recession, leading many analysts to believe there is a good chance of a rate cut being announced as early as January 2012. While an interest rate cut would stimulate activity, it will not however represent a quick fix for the economy – demand in exports is coming down due to problems in the Euro zone (South Africa’s biggest trading partner), unemployment remains high as does inflation, all factors contributing towards a shaky outlook.

Economic Growth (GDP)


Fig 1: Exchange RateUpdated 01 December 2011

Market Overview

Source: StatsSA

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

2

4

6

8

10

12

14

16

18

Average ZAR/USD Average ZAR/EURO Average ZAR/POUND

Euro officially launched

2008/2009 Recession &

election uncertainty

Rand fallout

Euro debt crisis

Exchange Rate


Market Overview

COMMENTARY• The rand (along with other emerging market currencies) continues to weaken against all

majors, reaching its lowest level in two and a half years against the US$ in late November• The rand has depreciated by about 20% against the dollar, the euro and the pound so far

this year • This has the dual effect of keeping exports cheaper, but at the same time pushing inflation

higher

South Africans have been labeled as quite “schizophrenic” regarding their reaction to the rand. When it is strong, there are calls to weaken it in order to make exports cheaper, and when it is weak, we are dissatisfied because it puts pressure on inflation. Unfortunately, local policy makers have little control over the fate of the rand. It will wax and wane with the global environment. According to RMB, the trouble is not so much the level of the rand, but its volatility. In 2011 it fluctuated between R6,56/$1 and R8,58/$1, making international trade and long-term investment decisions more difficult to make, hurting business sentiment.

Exchange Rate


Fig 1: Oilseed Market TrendsUpdated 01 December 2011

Market Overview

Source: FNB

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

0

1000

2000

3000

4000

5000

6000

Sunflower Spot Soya Spot

c/kg

Prices drop due to larger than expected supplies in international markets

Prices rise due to cut in US supply forecast

Input Prices: Oilseed


Fig 2: Cereal Market TrendsUpdated 01 December 2011

Market Overview

Source: FNB

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Yellow Maize White Maize Wheat

R/ton

Prices of yellow maize & white maize increased

by ± 28% and 35% during 2011

Surplus of grains in international markets

knocks prices

Input Prices: Cereals (Maize, Wheat)


Fig 3: Beef and Poultry Market TrendsUpdated 01 December 2011

Market Overview

Source: FNB

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Frozen whole chicken Fresh whole chicken Contract beef Weaner calf

Chicken prices show stability, while beef is

more susceptible to infla-tionary pressures

Prices rise due to increase in prices at

producer level

Input Prices: Beef & Poultry


Fig 4: Vegetable Market TrendsUpdated 01 December 2011

Market Overview

Source: FNB

Q1 2008

Q2 2008

Q3 2008

Q4 2008

Q1 2009

Q2 2009

Q3 2009

Q4 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Q3 2011

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Tomatoes Potatoes Onions Carrots Cabbage

Prices dip due to increase in volumes

Supplies decrease due to black frost in central and northern regions, pushing up

prices

Vegetable prices have historically been subject to

volatility

Input Prices: Vegetables


Fig 5: Fuel Market Trends – Petrol, Diesel, ParaffinUpdated 01 December 2011

Market Overview

Source: FNB

01/0

603

/06

05/0

607

/06

09/0

611

/06

01/0

703

/07

05/0

707

/07

09/0

711

/07

01/0

803

/08

05/0

807

/08

09/0

811

/08

01/0

903

/09

05/0

907

/09

09/0

911

/09

01/1

003

/10

05/1

007

/10

09/1

011

/10

01/1

103

/11

05/1

107

/11

09/1

111

/11

200

300

400

500

600

700

800

900

1000

1100

1200

Unleaded Petrol - Inland 95 Diesel (Sulphur) Reef Illuminating Paraffiin (Reef)

c/litre

Decline in oil reserves, Middle East tension & oil price speculation

Demand for energy drops due to

recession Unrest in African oil producing countries

Fuel price increase due to weak rand

Input Prices: Fuel


Market Overview

COMMENTARY• Electricity prices continue to impact businesses and consumers• Vegetable prices experienced a dip across the board, with the prices of tomatoes, potatoes,

carrots and cabbage decreasing• Maize prices saw a slight drop in November

According to the United Nations, food prices have doubled over the past five years indicating that the trend is an rising one. In the short-term, food inflation has mainly been attributed to the rise in the price of maize, and it is believed that the full effect of the maize price has not yet filtered down completely to influence meat and dairy prices due to production cycles.

Input Prices


Fig 1: CPI, CPIX and Food InflationUpdated 01 December 2011

Market Overview

Source: StatsSA

Jan

06M

ar 0

6M

ay 0

6Ju

l 06

Sep

06

Nov

06

Jan

07M

ar 0

7M

ay 0

7Ju

l 07

Sep

07

Nov

07

Jan

08M

ar 0

8M

ay 0

8Ju

l 08

Sep

08

Nov

08

Jan

09M

ar 0

9M

ay 0

9Ju

l 09

Sep

09

Nov

09

Jan

10M

ar 1

0M

ay 1

0Ju

l 10

Sep

10

Nov

10

Jan

11M

ar 1

1M

ay 1

1Ju

l 11

Sep

11

Nov

11

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

22.0

Food and non-alcoholic beverages CPI PPI Lower Target Upper Target

CHANGE OF BASKET WEIGHTINGFuel, electricity &

food price increases

2008/2009 Recession

Effects of lower

demand

Inflation


Fig 1: CPI for Food, Personal Care, Alcoholic Beverages and Electricity and other FuelsUpdated 01 December 2011

Market Overview

Source: StatsSA

Jan-

09

Feb-

09

Mar

-09

Apr

-09

May

-09

Jun-

09

Jul-0

9

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10

Feb-

10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-1

0

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb-

11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-1

1

Aug

-11

Sep

-11

Oct

-11

-4

1

6

11

16

21

26

31

36

Food Personal Care Alcoholic Beverages Electricity and other Fuels

Fuel and electricity price hikes push food prices up

Alcoholic beverage prices remain stable

Inflation


Fig 1: CPI by Food Type Updated 01 December 2011

Market Overview

Source: StatsSA

All Item

s

Proces

sed F

oods

Unproc

esse

d Foo

ds

Bread a

nd C

ereals

Meat

Fish

Milk, E

ggs a

nd C

hees

e

Oils an

d Fats Frui

t

Vegeta

bles

0%

5%

10%

15%

20%

25%

6.0%

10.3% 10.5%8.9%

14.6%

7.7%

2.7%

22.6%

9.8%11.8%

October 2011Most food groups are experiencing inflation well above CPI levels

of 6%

Inflation: CPI by Food Type


Fig 1: CPI by ProvinceUpdated 01 December 2011

Market Overview

Source: StatsSA

Wes

tern C

ape

Easter

n Cap

e

Northe

rn Cap

e

Free S

tate

KwaZulu

Nata

l

North W

est

Gauten

g

Mpumala

nga

Limpo

po0%

1%

2%

3%

4%

5%

6%

7%

8%

5.9%

7.1%7.6%

6.6%6.0%

6.6%5.9% 6.1% 6.1%

October 2011

Only Gauteng and the Western Cape are

experiencing inflation below CPI levels

Inflation: CPI by Province


Market Overview

COMMENTARY• CPI increased from 5.7% in September to 6% in October, its highest level since January

2010• PPI increased from 10.5% to 10.6%• Food and non-alcoholic beverages inflation increased from 8.5% to 10.6% in October, its

highest level since May 2009• The Reserve Bank expects inflation to peak at about 6,3% in the first quarter of 2012 before

declining gradually and returning to within the target range in the final quarter

October saw CPI reaching the Central Bank’s upper target of 6%. Analysts were of the opinion that the Bank may therefore start toying with the idea of cutting interest rates to boost the economy. Higher food and fuel costs have been driving the rise in prices, coupled with a rand exchange rate that has weakened close to 30% against the dollar this year. However Reserve Bank Governor Gill Marcus commented that “in the current climate we think we should watch (the breach) rather than respond to it”. It is therefore likely that the Reserve Bank will continue with its “wait and see approach” and consumers will have to deal with higher prices for a little while longer.NOTE: In January 2009, the official measure of inflation in South Africa switched from the CPIX, based on a basket of goods and services excluding bond repayments, to the CPI, which includes bond repayments, and is based on a basket which has been reweighted to be more representative of what the average South African household is spending its money on.

Inflation


Fig 1: Prime Lending RateUpdated 01 December 2011

Market Overview

Source: South African Reserve Bank

Jan

2000

May

200

0S

ep 2

000

Jan

2001

May

200

1S

ep 2

001

Jan

2002

May

200

2S

ep 2

002

Jan

2003

May

200

3S

ep 2

003

Jan

2004

May

200

4S

ep 2

004

Jan

2005

May

200

5S

ep 2

005

Jan

2006

May

200

6S

ep 2

006

Jan

2007

May

200

7S

ep 2

007

Jan

2008

May

200

8S

ep 2

008

Jan

2009

May

200

9S

ep 2

009

Jan

2010

May

201

0S

ep 2

010

Jan

2011

May

201

1S

ep 2

011

Jan

2012

5%

7%

9%

11%

13%

15%

17%

19%

Rate

2008/2009 Recession

SARB takes aggressive steps to fight inflation

SARB adopts ‘wait & see’ approach

Interest Rates


Market Overview

COMMENTARY• The prime lending rate remains at 9% as the Reserve Bank decided to leave the repo rate

unchanged at 5.5% • This is the lowest level since 1974

The prime interest rate is expected to stay unchanged at 9% until late next year due to global economic concerns and slow growth. This low interest rate environment has led to households reducing their debt to disposable income ratio from more than 81% three years ago to 75.9% in the second quarter of 2011. This means the cost of servicing debt as a percentage of disposable income of households also declined, leaving South African consumers with more disposable income. However, despite this positive shift, debt levels are still extremely high and this, coupled with high food and fuel prices will probably cause consumers to buy more non-durables, like food and clothing this Christmas, say analysts. While this is good news for South Africa’s major food retailers, it does mean that sales of higher margin goods such as general merchandise will probably be muted.

Interest Rates


Fig 1: Key Labour Market ComponentsUpdated 09 November 2011

Market Overview

Source: StatsSA

Mar

200

1Ju

n 20

01S

ep 2

001

Dec

200

1M

ar 2

002

Jun

2002

Sep

200

2D

ec 2

002

Mar

200

3Ju

n 20

03S

ep 2

003

Dec

200

3M

ar 2

004

Jun

2004

Sep

200

4D

ec 2

004

Mar

200

5Ju

n 20

05S

ep 2

005

Dec

200

5M

ar 2

006

Jun

2006

Sep

200

6D

ec 2

006

Mar

200

7Ju

n 20

07S

ep 2

007

Dec

200

7M

ar 2

008

Jun

2008

Sep

200

8D

ec 2

008

Mar

200

9Ju

n 20

09S

ep 2

009

Dec

200

9M

ar 2

010

Jun

2010

Sep

201

0D

ec 2

010

Mar

201

1Ju

n 20

11S

ep 2

011

3000400050006000700080009000

10000110001200013000140001500016000170001800019000

Employed Not Economically Active Labour force Unemployed

Expanded Public Works Programme introduced

Effects of recession felt

Employment


Market Overview

COMMENTARY• The official unemployment rate went down from 25.7% to 25% in the third quarter of 2011• Restrictive labour laws and a lack of skills among the youth are two of the major problems

currently facing the labour market today

The number of persons in the labour force increased by 98,000 between Q2 2011 and Q3 2011 and formal sector employment increased by 238,000 jobs, while informal sector employment decreased by 53,000 jobs. It is hoped that the much discussed Youth Wage Subsidy will be implemented as planned on 1 April 2012, reducing chronic youth unemployment, aiding businesses which are struggling with high wage costs and increasing consumer spending. According to StatsSA, more than 72% of the officially unemployed population is younger than 34.Low levels of employment means fewer breadwinners in South African families and therefore lower disposable income. It is hoped though, that the country can build on the small improvement of the last quarter.

Employment


Fig 1: Percentage of Disposable Household Income Devoted to Debt RepaymentUpdated 09 November 2011

Market Overview


2005

/Q1

2005

/Q2

2005

/Q3

2005

/Q4

2006

/Q1

2006

/Q2

2006

/Q3

2006

/Q4

2007

/Q1

2007

/Q2

2007

/Q3

2007

/Q4

2008

/Q1

2008

/Q2

2008

/Q3

2008

/Q4

2009

/Q1

2009

/Q2

2009

/Q3

2009

/Q4

2010

/Q1

2010

/Q2

2010

/Q3

2010

/Q4

2011

/Q1

2011

/Q2

50%

55%

60%

65%

70%

75%

80%

85%

Effects of low interest rates

Boom period

Household Debt


Market Overview

COMMENTARY• Household debt dropped to 75.9% (Q2, 2011), meaning that for every R100 earned,

households have R75.90 debt • The level was described by Reserve Bank chief economist, Monde Mnyande as “relatively

elevated”• Q2 also showed a rise in YOY disposable income growth from 8.9% (Q1) to 9.9%

Though the debt situation improved slightly in the second quarter, consumers are still experiencing high levels of financial vulnerability regarding debt. This is shown by the percentage of consumers with impaired records increasing from 46.4% (Q1) to 46.7% (Q2). Some analysts are of the opinion that although the ratio of household debt to disposable income is declining, this is taking place too slowly and as long as it remains relatively high, South Africans will continue to be in a vulnerable position and economic growth under threat.

Household Debt


Fig 1: Consumer Confidence IndexUpdated 01 December 2011

Market Overview

Source: Bureau for Economic Research

Mar

01

Jun

01S

ep 0

1D

ec 0

1M

ar 0

2Ju

n 02

Sep

02

Dec

02

Mar

03

Jun

03S

ep 0

3D

ec 0

3M

ar 0

4Ju

n 04

Sep

04

Dec

04

Mar

05

Jun

05S

ep 0

5D

ec 0

5M

ar 0

6Ju

n 06

Sep

06

Dec

06

Mar

07

Jun

07S

ep 0

7D

ec 0

7M

ar 0

8Ju

n 08

Sep

08

Dec

08

Mar

09

Jun

09S

ep 0

9D

ec 0

9M

ar 1

0Ju

n 10

Sep

10

Dec

10

Mar

11

Jun

11S

ep 1

1D

ec 1

1

-15

-10

-5

0

5

10

15

20

25

3

-7-9 -9

-2

1

-1

-12

0 1

-9

4

-7

20

64

1917 17

20 21 20

17 18

2321

18

22

12

-6

-1

-4

1

4

1

6

15 14 15 14

911

4 5

2008/2009 Recession

Boom period –

High levels of GDP growth

Period of recovery

Consumer Confidence


Market Overview

COMMENTARY• Consumer confidence increased by 1 index point in Q4 of 2011 to +5 (from +4 in Q3 of

2011)• Consumer confidence increased due to a slightly higher percentage of consumers

expecting an improvement in their household finances and a slightly lower percentage rating the present as the wrong time to buy durable goods relative to Q3 of 2011

• However, these increases were partially countered by a decline in the percentage of consumers that expect the economic situation in South Africa to improve over the next 12 months

In Q4 of 2011 consumers became even more pessimistic about the economy, but slightly more optimistic about their own finances. Consumer confidence remains above average though, supportive of consumer spending. This means that consumers will spend the bulk of any increases in real disposable income going forward. However, accelerating inflation will likely dent the growth in real disposable income over the short term, which will probably lead to lower growth in consumer spending given the limited access to bank credit.

Consumer Confidence


Fig 1: Retail Trade Sales (R’m)Updated 01 December 2011

Market Overview


Jan

2002

Apr

200

2Ju

l 200

2O

ct 2

002

Jan

2003

Apr

200

3Ju

l 200

3O

ct 2

003

Jan

2004

Apr

200

4Ju

l 200

4O

ct 2

004

Jan

2005

Apr

200

5Ju

l 200

5O

ct 2

005

Jan

2006

Apr

200

6Ju

l 200

6O

ct 2

006

Jan

2007

Apr

200

7Ju

l 200

7O

ct 2

007

Jan

2008

Apr

200

8Ju

l 200

8O

ct 2

008

Jan

2009

Apr

200

9Ju

l 200

9O

ct 2

009

Jan

2010

Apr

201

0Ju

l 201

0O

ct 2

010

Jan

2011

Apr

201

1Ju

l 201

1O

ct 2

011

2000022500250002750030000325003500037500400004250045000475005000052500550005750060000

Spikes indicate festive season sales peaks

Retail Sales


Fig 2: Retail Trade Sales (R’m) – Trended Updated 01 December 2011

Market Overview

Source: StatsSA. Measure: Economic activity in the retail trade based on a sample of income tax registered private & public enterprises (incl VAT). Consists of food, beverages & tobacco (largest contributor ± 35%), pharmaceutical & medical goods, cosmetics, toiletries, household furniture, appliances, articles & equipment, repair of personal & household goods, hardware, paints & glass, textiles, clothing, footwear & leather goods.

Jan

2002

Apr

200

2Ju

l 200

2O

ct 2

002

Jan

2003

Apr

200

3Ju

l 200

3O

ct 2

003

Jan

2004

Apr

200

4Ju

l 200

4O

ct 2

004

Jan

2005

Apr

200

5Ju

l 200

5O

ct 2

005

Jan

2006

Apr

200

6Ju

l 200

6O

ct 2

006

Jan

2007

Apr

200

7Ju

l 200

7O

ct 2

007

Jan

2008

Apr

200

8Ju

l 200

8O

ct 2

008

Jan

2009

Apr

200

9Ju

l 200

9O

ct 2

009

Jan

2010

Apr

201

0Ju

l 201

0O

ct 2

010

Jan

2011

Apr

201

1Ju

l 201

1O

ct 2

011

2000022500250002750030000325003500037500400004250045000475005000052500550005750060000

Effects of 2008/2009 Recession

felt

Boom period

Positive retail environment

despite economic

uncertaintyRetail Sales: Trended


Market Overview

COMMENTARY• Retail sales growth for September unexpectedly accelerated to 8.3% compared to

September 2010, when the market had expected growth of 6.4%• The highest growth rate was recorded by retailers in hardware, paint and glass while

retailers of food, beverages and tobacco in specialised stores experienced a 0% YOY increase in retail sales for the month

Analysts believe that this level of growth is unsustainable and must be considered in light of the soccer World Cup last year, which had caused a spike then created a lower base for the current results. It is however an indication that the low interest rates, slightly improved employment levels and high nominal income levels are supporting some South African consumers, although food retailers seem to be suffering from high food inflation levels globally. With household debt still so high, consumers are expected to spend cautiously this festive season.

Retail Sales


DisclaimerThese materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects.

Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein.

TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein.

TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy.

* TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence

For further information:+27 (0)31 303 2803 / [email protected]

Other SourcesABSA Agri Trends; BizCommunity; Bloomberg; Business Day; Business Report; Department of Agriculture, Forestry and Fisheries; Financial Mail; Finweek; Fin 24; The Mercury; Reuters; Sunday Times; Sunday Tribune; The Times ; www.businesslive.co.za; www.businessweek.com; www.moneyweb.co.za; www.supermarket.co.za

mailto:[email protected]

south african economic indicators november 2011

Documents

market overviewsource

trade intelligencefig

international trade

pricesinput prices

volatilityinput prices

prices of tomatoes

food prices

pricesvegetable prices