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While all the attention was focused on the Budget 2025 speech that did not happen this week, the good news was that the postponement did not affect the rand much. However, the unemployment data was disappointing again.
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), says the rand exchange rate was a touch stronger on Friday against the dollar and euro than the previous week, trading at R18.38/dollar on Friday afternoon. Last Friday, the rand traded at R18.32/dollar.
Bianca Botes, director at Citadel Global, also noted that the rand traded largely range-bound for the week. “While the “budget which never took place” rattled the currency on Wednesday, the rand quickly recovered ground to settle towards the stronger end of its trading range by Friday afternoon.”
Isaac Matshego and Busisiwe Nkonki, economists at the Nedbank Group Economic Unit, also point out that the rand pulled back after falling to R18.51/dollar from R18.40 in late trading on Wednesday in the aftermath of the sudden postponement of the Budget 2025 speech.
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Gold was the star performer this week, surging to a record high of $2 942/ounce on Monday. Botes says the precious metal continued to hover near these historic levels, trading at $2 935 by Thursday, supported by safe-haven demand amid geopolitical tensions and inflation concerns.
IJssel de Schepper points out that gold has become the ultimate ‘Trump trade’ with its safe-haven and inflation-hedge qualities appealing to investors who are worried about the impact on economic growth and prices of potential Trump-triggered trade disruptions.
Matshego and Nkonki say the gold price set a new record high of $2 946.85 an ounce on Wednesday as it benefitted from its safe-haven status amid heightened concerns about the likely trade war between the US and its key trading partners.
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Oil markets experienced a midweek rally, with WTI crude climbing above $72/barrel and Brent reaching $75.98/barrel. Botes says the surge was driven by supply uncertainties from Russia, Kazakhstan and the expanded Organisation of the Petroleum Exporting Countries (OPEC+), as well as potential disruptions in US production. However, prices moderated slightly on Thursday following a build in US crude inventories.
Matshego and Nkonki say the Brent crude oil price was up by 2.4% this week, while Russia reported a 30-40% drop in oil flows through the key crude export route, Caspian Pipeline Consortium, following a Ukrainian drone attack on a pumping station.
“Further upside pressure emanated from uncertainty regarding the resumption of exports from Iraq’s Kurdistan region and a possible delay in OPEC+ supply increases. Gains were, however, contained by the possibility of easing US-Russia tensions and a positive outcome from the Russia-Ukraine peace talks, which could see sanctions on Russia lifted, and oil exports fully restored.”
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According to Statistics SA’s Quarterly Labour Force Survey for the fourth quarter, the official unemployment rate declined by 0.2% to 31.9%, with total employment increasing by 132 000 in the fourth quarter, with growth driven by four of the ten sectors.
Nomvelo Moima, economist at the BER, says the second consecutive quarter of improvement in the unemployment rate is a welcomed indication of slightly better labour market conditions during the second half of 2024.
“However, the expanded unemployment rate (which includes discouraged workers) remained steady at 41.6%, while the number of discouraged jobseekers increased further, continuing a concerning trend since the pandemic.”
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, point out that the 0.2% decrease in unemployment suggest a steady improvement in the economy’s ability to create jobs and absorb workers, youth unemployment remains critically high at 59.6% for the age group 15 to 24 and 39.4% for the age group 25 to 34.
“This data underscores the urgent need to accelerate pro-growth structural reforms to drive sustainable and inclusive economic expansion.”
Matshego and Nkonki are also worried about the increase in the number of discouraged workers increasing by 110 620.
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In line with expectations of a modest increase, real retail trade sales increased by 3.1% in December compared to the previous year after a 7.6% jump in November, which was the strongest month since July 2022.
Consumers were buying textiles, clothing, footwear and leather goods, increasing sales by 7.8%, while wholesale trade sales also showed positive growth of 0.9% after a sharp 7% decline the previous month.
Real retail trade sales increased by 2.5% in 2024, while wholesale trade sales fell by 5.2% and motor trade sales decreased by 3.4%.
Moima says the increase in retail trade sales suggests that the trade sector will likely add to gross domestic product (GDP) for the fourth quarter and indicates that consumers, who experienced some windfalls during this period, ended the year on a strong note.
“The question is to what extent this momentum will be sustained into 2025, especially if significant tax increases are implemented.”
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Matshego and Nkonki point out that retailers benefitted from better sales in 2024, which increased by 2.5% compared to 2023, with five of the seven sectors showing growth. “This reflects stronger consumer demand, boosted by lower inflation. The 50 basis points rate cut in 2024 likely improved sentiment, but its effect on financial conditions is too early to gauge.”
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say while the impact of the two-pot retirement system withdrawals is expected to diminish over time, they anticipate continued positive spending momentum into 2025.
“This outlook is supported by several factors: a recovery in household incomes driven by accelerating wages and moderating inflation, lower borrowing costs, improved domestic political risk and consumer sentiment. These factors should also contribute to stronger asset prices, strengthening consumer balance sheets and further fuel retail sales growth.”
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