Muted house price growth in 2019; demand-supply gap narrowing.
The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) unanimously decided to cut the repo rate by a steep 100 basis points to 5.25%. The SARB's forecasts remain above ours, which leads us to believe that there is still room for more cuts. The FNB/BER Consumer Confidence Index slid further to -9 in the first quarter of 2020. Consumer prices ticked marginally higher to 4.6% y/y in February 2020, and retail sales started 2020 with an increase of 1.2% y/y in January.
This week will certainly be a memorable one in the history books as global markets plunged twice, on Monday and Thursday, to levels last seen in the 2008 recession. The main culprits for this pandemonium are the coronavirus disease (Covid-19) and the Russia–Saudi Arabia oil price war. We expect the SARB to cut interest rates by 25 basis points on Thursday. The RMB/BER Business Confidence Index deteriorated to a mere 18 index points in 1Q20. Mining production recorded an annual increase in January of 7.5% y/y, and manufacturing production decreased in January by 2% y/y.
The 4Q19 SA GDP growth contracted by 1.4% q/q on a seasonally adjusted annualised basis, highlighting that the economy endured a technical recession during 2H19. SA recorded a trade deficit of R1.9 billion in January 2020. The Absa manufacturing PMI printed at 44.2 index points, and new vehicle sales fell 0.7% y/y. The current account deficit narrowed to -1.3% in 4Q19 from -3.7% in 3Q19.
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