Economic Overview

ECONOMIC ACTIVITY AND THE FED’S PENDING DECISION

Last week’s economic activity data reinforced our feeling that gross domestic product (GDP) growth in South Africa (SA) will remain subdued, and that we are still some distance away from pre-pandemic levels. Recently, the retail and manufacturing sectors took a hard blow owing to violent unrests and tighter COVID-19 restrictions.

HOW SOUTH AFRICA CAN GET OUT OF THE POVERTY TRAP

Last week, Statistics South Africa (Stats SA) reported on South Africa’s (SA’s) second quarter gross domestic product (GDP). We were glad to see that GDP growth came in better than expected. Consensus believed that growth in the second quarter would be somewhere around 0.9%, when measured against the previous quarter, but was, in fact, 1.2%.

AS THE WORLD SLOWS DOWN, THE RAND STRENGTHENS

More and more data from major economies in the Northern Hemisphere is showing that economic recoveries have started to lose steam. This is evident from both survey and hard-activity data that were released during the Northern Hemisphere’s summer break.

AUGUST ECONOMICS

SOUTH AFRICA’S FISCAL MULTIPLIER

During the past week or so, there has been considerable talk about South Africa’s (SA’s) fiscal multiplier, a ratio that illustrates by how much output rises for each level of government spending.

MORE POSITIVE INDICATORS AND LOCAL POLICY AMENDMENTS

Last week another collection of positive economic indicators emerged from the United States (US). Many more experts have, therefore, voiced the opinion that the US Federal Reserve (Fed) might start to curb their monetary support by the end of 2021.

GOLDILOCKS GROWTH AND A NEW CABINET

The United States’ (US) second-quarter gross domestic product (GDP) growth was disappointing, coming in at 6.5% instead of the expected 8.5%. However, the US has in fact now recovered from its largest peak-to-trough fall in output on record.

JULY ECONOMICS: CHINESE REGULATIONS AND INFLATION

 In a recent newsletter, I briefly mentioned our concern around regulatory uncertainty in China. In July, however, this became one of our main themes after the MSCI China, a broad index that tracks the Chinese equity market, fell by 18.8%.

THE LATEST ECONOMIC NEWS FROM THE UNITED STATES AND SOUTH AFRICA

In the United States (US), inflation, once again, surprised to the upside. Compared to June 2020, headline inflation increased to 5.4% in June 2021, up from May’s 5.0%. Core inflation, which excludes more volatile energy and food prices, rose by 4.5%.

A SUBJECTIVE VIEW OF SOUTH AFRICA’S LONG-TERM TRAJECTORY

How you interpret the world around you and, subsequently, forecast what may be, is based on your worldview. Your worldview is, to a large extent, shaped by your external environment (experiences and exposure) and your internal thoughts and emotions.

What a world we live in: falling oil prices and spending less time working

The Organization of the Petroleum Exporting Countries (OPEC), together with their new ally, Russia, have, once again, been unable to reach an agreement about global oil supply. Disagreements between OPEC members have been a feature of the cartel since it started more than 60 years ago.

INTERNATIONAL TAX, INTERESTING STORIES, AND SOME JAIL TIME

Last week officials from 130 countries, representing 90% of the global gross domestic product (GDP), met virtually to agree on the broad outlines of what would be the most sweeping change in international taxation in a century. The Biden-backed 15% global minimum tax (GMT) aims to prevent multinational corporations from pitting countries against one another in a bid to push tax rates down.