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Hold thumbs for new rate cut this week
After a series of critical economic indicators to be released this week, Reserve Bank governor Tito Mboweni could pre-empt the scheduled April meeting of the monetary policy committee (MPC) and announce a change in the official repo rate from 10.5 percent.
If the figures warrant it, a move after the market close on Friday, when all the data have been published, would be appropriate - or, if gross domestic product (GDP) figures due on Monday are bad enough, then at the end of the day.
Consumer inflation figures, due on Wednesday, are expected to show headline inflation running at a little over half its August peak of 13.7 percent.
Producer figures on Thursday could show monthly price declines continuing - a sign that consumer price inflation will moderate further.
And credit figures on Friday will show the lagged effect of the rate hikes.
Mboweni hiked the repo rate by five percentage points, from seven percent in June 2006, to rein in borrowing and spending and bring inflation below the ceiling of the bank's target range of 3-6 ercent.
Proof that he is achieving these objectives will open the way to early and possibly large rate cuts.
In an interview on February 6 Mboweni raised the possibility of an unscheduled MPC meeting. This followed his comment at a press conference, after the MPC meeting the day before, that the one percentage point cut he had just announced was less than he had wanted.
He said he had argued for a two percentage point cut but had been persuaded by other MPC members that the smaller cut was more appropriate.
This week's news could support his case.
In the third quarter, GDP rose only 0.2 percent - a seasonally adjusted, annualised quarterly change. The fourth quarter is likely to have been worse: manufacturing output fell seven percent, electricity production 10.6 percent and mining 11 percent year-on-year in December.
But the fourth-quarter performance of one of the country's largest sectors - which includes finance, real estate and business services - is still uncertain.
John Loos, a property strategist at First National Bank (FNB), said the home loans market had been in recession since mid-2007, as growth in new home loans granted became "strongly negative" - in other words, clients paid back more than they borrowed.
He said Reserve Bank figures for the third quarter showed a decline of about 30 percent in new home loans granted, compared with the same period in the previous year, and he expected a similar figure for the fourth quarter.
The year-on-year decline in the FNB House Price index "continued in January to minus four percent from a revised December rate of minus 2.1 percent". He predicted that deflation "could be with us for much of 2009".
But Danelee van Dyk, an economist at Standard Bank, said the business services subsector could still show strength: "It is a lagging indicator."
She pointed out that the financial, real estate and business services sector as a whole grew 3.2 percent in the third quarter. "So it's likely it was still growing in the fourth."
At this point economists are expecting a fourth-quarter contraction of between 1.5 percent and 2 percent. |
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