SOUTH Africa’s trade deficit widened to R19-billion in August‚ its largest in seven months and far higher than analysts expected‚ as strikes cut mining output and a weaker rand failed to boost exports.
Exports fell by R5.8-billion‚ or 7.6%‚ and imports by R13-million‚ or 0.1%.
Analysts had expected a R12-billion deficit‚ following a R13.4-billion shortfall in July. The cumulative deficit for the year has now risen to R107.3-billion compared with R69.9-billion in the same period last year.
The figures have sparked fresh concerns over the current account deficit‚ which could remain elevated in the third quarter. The trade balance is one component of the current account‚ which recorded a deficit of 6.5% of gross domestic product in the second quarter‚ higher than the globally acceptable level of about 3%.
A recession in the eurozone‚ from which the region emerged in the second quarter‚ a moderation in Chinese economic growth and weak global demand are among the factors that have prevented stronger growth in local exports.
While exports have been growing for most of the year‚ it has been at a slower pace than that of imports. But both exports and imports fell during August‚ with the decline in exports driven by lower mineral products exports. This could partly be explained by work stoppages at some of South Africa’s gold mines. Citi economist Gina Schoeman said a weak currency had helped exports grow 12% for the year to date‚ compared with 7% for the same period last year. She said the 12% still seemed “poor”‚ however‚ considering the extent of rand weakness. The rand temporarily weakened on the trade data on Monday but quickly rebounded‚ tracking the euro‚ which firmed on dollar weakness.
It weakened to R10.15/$ before recouping some of the losses to trade at around R10.04/$.
“If we do not see a significant compression in the trade deficit in the third quarter then it means we could see a current account deficit of above 6% for this year‚” Standard Bank economist Shireen Darmalingam said. While the weaker rand has boosted exports‚ it has also made imports of key commodities such as oil more expensive.
“Aside from the contraction in exports‚ another factor that led to the surprise widening of the deficit was the sharp increase in the rand price of Brent crude in August‚” ETM Analytics economist Jana le Roux said.
Oil prices hovered above $110/barrel in August and last month on concerns that the US would use military force against Syria for using chemical weapons.
“The combination of higher global oil prices and the weaker rand exacerbated upside pressure on imports‚ which were virtually unchanged‚” Le Roux said.
Imports of mineral products and base metals rose during the month while those of machinery and electrical appliances‚ vehicles and vegetables fell.
“Imports are slowing moderately as the consumer slows and exports are struggling on the back of labour unrest and constrained productivity‚” said Rand Merchant Bank Global Markets industry analyst Jason Muscat.
He said a “rebalancing” of the economy was necessary‚ with production having to improve to make up for the slowing growth in household consumption expenditure. Muscat said that while the country was likely to face a “difficult” last quarter‚ exports would rise once the “labour issues” were resolved.
The growth in exports would be supported by a weaker rand and an improving global economic environment‚ he said. The International Monetary Fund expects the global economy to expand 3.1% this year. — BDLive
SA’s trade deficit grows to R19bn
Exports fell by R5.8-billion‚ or 7.6%‚ and imports by R13-million‚ or 0.1%.
Analysts had expected a R12-billion deficit‚ following a R13.4-billion shortfall in July. The cumulative deficit for the year has now risen to R107.3-billion compared with R69.9-billion in the same period last year.
The figures have sparked fresh concerns over the current account deficit‚ which could remain elevated in the third quarter. The trade balance is one component of the current account‚ which recorded a deficit of 6.5% of gross domestic product in the second quarter‚ higher than the globally acceptable level of about 3%.
A recession in the eurozone‚ from which the region emerged in the second quarter‚ a moderation in Chinese economic growth and weak global demand are among the factors that have prevented stronger growth in local exports.
While exports have been growing for most of the year‚ it has been at a slower pace than that of imports. But both exports and imports fell during August‚ with the decline in exports driven by lower mineral products exports. This could partly be explained by work stoppages at some of South Africa’s gold mines. Citi economist Gina Schoeman said a weak currency had helped exports grow 12% for the year to date‚ compared with 7% for the same period last year. She said the 12% still seemed “poor”‚ however‚ considering the extent of rand weakness. The rand temporarily weakened on the trade data on Monday but quickly rebounded‚ tracking the euro‚ which firmed on dollar weakness.
It weakened to R10.15/$ before recouping some of the losses to trade at around R10.04/$.
“If we do not see a significant compression in the trade deficit in the third quarter then it means we could see a current account deficit of above 6% for this year‚” Standard Bank economist Shireen Darmalingam said. While the weaker rand has boosted exports‚ it has also made imports of key commodities such as oil more expensive.
“Aside from the contraction in exports‚ another factor that led to the surprise widening of the deficit was the sharp increase in the rand price of Brent crude in August‚” ETM Analytics economist Jana le Roux said.
Oil prices hovered above $110/barrel in August and last month on concerns that the US would use military force against Syria for using chemical weapons.
“The combination of higher global oil prices and the weaker rand exacerbated upside pressure on imports‚ which were virtually unchanged‚” Le Roux said.
Imports of mineral products and base metals rose during the month while those of machinery and electrical appliances‚ vehicles and vegetables fell.
“Imports are slowing moderately as the consumer slows and exports are struggling on the back of labour unrest and constrained productivity‚” said Rand Merchant Bank Global Markets industry analyst Jason Muscat.
He said a “rebalancing” of the economy was necessary‚ with production having to improve to make up for the slowing growth in household consumption expenditure. Muscat said that while the country was likely to face a “difficult” last quarter‚ exports would rise once the “labour issues” were resolved.
The growth in exports would be supported by a weaker rand and an improving global economic environment‚ he said. The International Monetary Fund expects the global economy to expand 3.1% this year. — BDLive
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