The South African economy grew by an annualized 66.1% in the third quarter of 2020, recovering from a record 51.7% decline in the April-June period and beating market expectations of 52.6%. It was the strongest pace of expansion since at least 1993, with manufacturing, trade and mining the biggest growth drivers after the easing of COVID-19 lockdown restrictions. Despite the rebound, the economy is still 5.8% smaller than at the end of 2019.
Manufacturing rose at an annual rate of 210.2%, driven largely by increased production of base metals, petroleum, vehicles, food and beverages. The trade, catering and accommodation industries increased by 137%; mining and quarrying increased at a rate of 288.3%. Spending on GDP increased at an annual rate of 67.6% in the third quarter, as household consumption, exports and investment recovered. Source: Statistik Afrika Selatan
The Rand has benefited from the decline in the US Dollar since the election, despite Fitch and Moody’s recently downgraded credit ratings. Annual consumer inflation fell slightly in November, to 3.2% from 3.3% in October. There are no monthly changes in the index. Prices of food and non-alcoholic beverages continued to rise, posting an aggregate annual increase of 5.8%, up from 5.4% in October. Food inflation contributed 1.0 percentage points to the November headline level of 3.2%.
The country will also see retail sales released, with analysts expecting a 2.6% figure. Retail Sales in South Africa increased 1.10 percent in September 2020.
USDZAR fell past the 15.00 level this week and the pair has now surpassed this level. A move back above 15.00 could see the formation of a medium term lower high in the downtrend channel, but another rejection at that level would make USDZAR move towards the 14.00 level as a fresh low on the demand level. Overall the bearish trend is still strong and has not found ground.
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Ady Phangestu
Analyst – HF Indonesia
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