INTERNATIONAL ECONOMIC NEWS
US inflation declines m-o-m
The US Consumer Price Index declined by 0.4% m-o-m in April, compared to the 0.2% decline in March. However, the annual consumer inflation figure for April increased by 1.1% (although this was a slowdown from the seasonally-adjusted March y-o-y inflation increase of 1.5%). Major contributors to the declining inflation number in April were decreases in energy and gasoline (4.3% and 8.1% m-o-m respectively). Food prices increased by a marginal 0.2% compared to no change the previous month. Core inflation, which excludes food and energy prices, was at 1.7% y-o-y and together with headline inflation of 1.1%, these figures are both well below the “trigger” rate of 2.5%, which is the point at which the Federal Reserve Bank would potentially change policy as a reactive measure.
Slight but positive growth in the German economy
The German economy avoided a recession by growing 0.1% q-o-q for 1Q13, which was lower than expected. Despite the very small growth, the 1Q13 results were a positive contrast to the previous quarter (4Q12), which saw a 0.7% q-o-q decline (revised downwards from the initial -0.6% q-o-q). Poor weather conditions were partly responsible for placing pressure on the economy as industries such as construction were largely affected. As the largest economy in the Eurozone, Germany is still relatively strong in comparison to the majority of other Eurozone countries. April’s unemployment figures of 7.1% (compared to many countries’ double-digit figures) is one example of economic fundamentals being stronger in Germany relative to the Eurozone region.
US industrial production decreases
In April, US data recorded a worse-than-expected decline in overall industrial production of 0.5% m-o-m which contrasted to the revised March gain of 0.3% m-o-m. Manufacturing was largely responsible as it declined 0.4% m-o-m following a 0.3% m-o-m decrease in March. Durable goods were a large contributor to the decline in manufacturing as it decreased by 0.6% m-o-m, while most major categories of manufacturing output declined over the period. The only exceptions were electronic and computer products, which showed some gains.
US housing starts decline
US housing starts recorded a sharp 16.5% m-o-m decline in April after a 5.4% gain in March. Despite the monthly decline, housing starts have still increased by 13.1% y-o-y. The key contributor to the monthly decline was a 38.9% decrease in the multi-family home component, following a 25.6% decrease the previous month. Permits were, however, surprisingly strong, increasing by 14.3% m-o-m in April from a 6.5% increase in March. This holds promise for future momentum in the housing sector.
INTERNATIONAL MARKET NEWS
International markets continue mildly positive gains
European markets gained ground last week amid the generally positive sentiment worldwide. The UK’s FTSE100 increased 1.5% and France’s CAC40 ended the week 1.2% higher. Germany’s DAX also ended the week 1.4% higher. Consumer sentiment data (which exceeded expectations) pushed the US market higher. The S&P 500 gained 2.1%, the Nasdaq gained 1.8% while the Dow Jones posted gains of 1.6%. In Japan, the Nikkei saw a positive upswing as it posted gains of 3.6%.
SOUTH AFRICAN ECONOMIC NEWS
Local retail sales growth decreases
Local retail sales, one of the key gauges of household spending, recorded a better-than-expected 2.8% increase y-o-y in March, even as households come under pressure from inflation (most notably in the price of fuel and electricity). Although this is a 1.1% decrease from the upwardly-revised February y-o-y growth of 3.9%, the growth is still positive. Reduced household spending is indicative of the weaker trade conditions in the South African market and will certainly be a consideration this week when the South African Reserve Bank make its decisions regarding monetary policy.
SOUTH AFRICAN MARKET NEWS
JSE ends the week in positive territory
The All Share Index ended the week higher with a gain of 2.9%. The gains were broad-based across sectors, with Financials (+2.2%), Industrials (+4.6%) and Resources (+0.3%) all ending the week in positive territory. The rand continued to weaken relative to major currencies this week (due to labour unrest fears in the platinum mining sector) and US dollar strength as commodity currencies felt the pressure of declining commodity prices. The rand closed the week at R9.40/US dollar (the last time the rand was at these levels was in April 2009).