FIFI PETERS: Now to take a birds-eye view of the financial system. The South African Reserve Bank launched its Quarterly Bulletin at present. It is a 127-page doc, primarily a window of how the South African Reserve Bank views the financial system, how progress is holding up, how the financial positions of look, the investments which might be being made by the personal and the general public sectors, in addition to the inflows which might be coming into our financial markets.
We have Iaan Venter, the senior supervisor of the Economic Statistics Department on the Reserve Bank. Iaan, thanks a lot to your time. We don’t typically discuss in regards to the Quarterly Bulletin on our present. I simply wish to know from you what you assume the details are for the listeners who’re members of households, in addition to listeners who’re working companies proper now. What is necessary that they should find out about this Quarterly Bulletin that you just guys put collectively?
IAAN VENTER: Good night, Fifi, sure. As you mentioned, the Bulletin is kind of a prolonged doc. It principally gives a report on the home financial developments within the first quarter of this 12 months. This bulletin particularly and truly – though loads of financial indicators are nonetheless nicely beneath their pre-Covid ranges – reveals that the primary quarter end result was usually fairly optimistic and powerful.
If you simply have a look at financial progress, GDP progress, it really accelerated to fairly a sturdy 1.9% within the first quarter, and it was fairly broad-based amongst all of the financial sectors. Household consumption expenditure progress slowed within the first quarter, but it surely was nonetheless fairly sturdy at 1.4%. Fixed funding additionally elevated at a fairly sturdy 3.6%. Then, though employment continues to be lagging, the Covid restoration elevated fairly strongly within the first quarter. And then South Africa’s commerce surplus with the remainder of the world additionally elevated within the first quarter, and this led to a slight improve within the surplus on the present account of the stability of funds. There was additionally a web influx of capital on the financial account, in comparison with an outflow within the fourth quarter of final 12 months. Also credit score extension by monitoring establishments to each households and corporations elevated within the first quarter. So, sure, possibly these are just some highlights I can point out.
FIFI PETERS: And principally optimistic highlights. As you mentioned, a quantity of the symptoms are reflecting that issues are on the up and maybe the worst of the Covid-19 storm is behind us. But the place are the areas of weak point presently within the financial system – as you guys see them?
IAAN VENTER: I feel there are particular sectors. I feel one should additionally add that the restoration has not been even amongst all of the sectors, so there are particular sectors like the development sector, for example, the place output continues to be approach beneath the pre-Covid degree. Employment, as I discussed, is lagging. And then clearly worth pressures are mounting, particularly enter costs which have elevated very sharply [and] vitality costs, gasoline and crude oil, in addition to meals costs, particularly grains. This has been made worse by the warfare in Ukraine. So much of it is usually world developments. But the worth pressures are among the many headwinds that we face.
FIFI PETERS: Yes. We are all feeling these worth pressures. They are definitely squeezing our pockets and our cash is doing a complete lot much less and having to get fewer items. We know that the South African Reserve Bank can also be fairly fearful about inflation; it’s one of your most important considerations. Just based mostly on the information, when do you see the inflation danger passing? I do know it’s very troublesome to name once we may have our peak and all that however, simply based mostly on what the numbers are saying, is it getting higher or are we nonetheless in for some powerful instances?
IAAN VENTER: I feel the statistics will not be but displaying that it has rotated. I feel we’ll nonetheless see some inflation accelerating. If you have a look at inflation [in] producer costs, which have been in double-digits for some time now, and [are] nonetheless rising, these are your enter prices. Those normally feed by way of to the Consumer Price Index with a bit of a lag. Then I feel the total affect of the food-price will increase internationally we haven’t seen but. So there may nonetheless be a bit of worth strain coming by way of earlier than issues flip round.
But I feel loads may also depend upon world developments – for example how lengthy the warfare lasts in Ukraine, if they can get meals provides out, the subsequent harvest there, and clearly the affect of that on crude oil costs and gasoline costs. So loads of that’s fairly unsure nonetheless at this level.
FIFI PETERS: I feel what’s additionally fairly attention-grabbing to see is that, even if issues are powerful for most individuals on the market, customers are nonetheless spending. I’m wondering [about] the state of customers. When we speak about them being below strain, are we exaggerating, given the truth that spending continues to be on the up in response to the Bulletin?
IAAN VENTER: Yes. what we did see is that spending is up, as you mentioned, however the progress charge has really halved. In the fourth quarter of final 12 months expenditure elevated by 3%. In the primary quarter it was 1.4%. So it’s slowing down, however it’s nonetheless fairly a robust improve and it was particularly sturdy in sturdy items.
There it was particularly car gross sales, so for the fourth quarter of final 12 months and the primary quarter of this 12 months car gross sales have been fairly sturdy. Before that they have been a bit weaker and there have been additionally loads of provide shortages. So one suspects that the rise we’ve seen within the final two quarters was as a result of of the provision of inventory. But should you have a look at the extra well timed month-to-month indicators, one can see a bit of a slowdown taking place; car gross sales got here down in the previous few months [as did] retail commerce gross sales.
So one just isn’t certain that these sturdy will increase will final. What I have to additionally point out is that after Covid lockdowns, the preliminary lockdowns, financial savings charges have elevated loads – family financial savings and company financial savings. So some of that expenditure might be financed from these financial savings that have been constructed up in the course of the lockdowns,
FIFI PETERS: Which is an efficient factor. I feel it has improved financial behaviour. What’s not so nice, although, is the truth that the extent of investments proper now into the financial system just isn’t as sturdy because it could possibly be, and definitely not on the ranges the place we have been earlier than getting into the pandemic. I’d such as you to talk to that, and simply while you assume we may see a change within the funding image that’s being made into the financial system, by each the general public sector or authorities and the personal sector.
IAAN VENTER: That’s an necessary level. I feel not less than what we’ve seen within the final quarter or so is a bit of a rise, really fairly sturdy will increase in two quarters now in funding. But should you have a look at the larger image, it’s nonetheless approach beneath pre-Covid ranges; even earlier than Covid funding progress was fairly weak.
Investment of course follows financial progress and it follows confidence. So if the financial system grows nicely the funding will come. And if enterprise confidence will increase, that additionally normally results in funding. So on each these fronts, particularly on the arrogance facet, it’s fairly weak. I feel all these world headwinds and inflationary pressures create loads of uncertainty, and uncertainty just isn’t good for funding.
FIFI PETERS: Yes, to not point out the native headwinds – Stage 6 load shedding, which of course just isn’t mirrored in your report. We’ll in all probability examine it subsequent time.
Iaan, thanks a lot for becoming a member of this present. Iaan Venter is senior supervisor for the Economic Statistics Department on the South African Reserve Bank.