Next week will be more exciting on the local data front, with the Business Confidence Index and the Absa PMI set to be released.
It was a quiet economic week in South Africa, while the world’s eyes remain on the United States (US) to see what will happen next, which will affect the local and global economy. The US tariffs can have a serious impact on countries’ economies, while the US president is threatening to fire the head of the Fed unless he lowers interest rates.
Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), agrees that it was another quiet data week domestically.
“The global data calendar was also relatively quiet, with an upward revision in the second estimate of the US gross domestic product (GDP) for the second quarter probably the most consequential release.
“It suggests that the economy is likely to perform much better in 2025 than most expected a few months ago. Outside of data, the US Federal Reserve (Fed) featured prominently in the headlines this week.”
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Volatile commodities
De Schepper says the oil price bumped slightly after the 50% US tariff for India kicked in. “Rough calculations suggest that the higher tariffs counter the gains India received from buying discounted Russian oil.
“The US maintains it is open to renegotiating tariffs if India stops buying oil from Russia, which it argues (correctly) is funding its war machine. Meanwhile, Russian drones targeted Kyiv this week, while Ukraine aimed for Russian refineries, which means that Russian wholesale petrol prices are now at record highs.”
However, she says, the international Brent Crude Oil price did not move much for the week as the India-tariff bump was countered by other more negative news for the price.
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Oil and gold also unstable
Bianca Botes, director at Citadel Global, says Brent Crude Oil prices closed the week at $68.40/barrel, up from the previous week, driven by signs of persistent Russia-Ukraine tensions and a sharp six-million-barrel drop in US crude inventories, signalling stronger demand.
“Prices fluctuated during the week as markets weighed tighter supply dynamics against bearish fundamentals like weak demand growth and increased production from OPEC+.”
She also points out that gold prices exhibited volatility but closed the week at $3 410/ounce, a slight uptick from the previous week’s $3 335/ounce, driven by a weakening US dollar and Powell’s Jackson Hole speech, which hinted at a potential September rate cut.
“Investors remain cautious ahead of today’s key PCE inflation report, while geopolitical uncertainties and expectations of looser US monetary policy continue to support gold’s appeal as a safe haven asset.”
Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, say commodity moves were relatively muted as Brent Crude Oil prices eased to near $67 per barrel, as concerns over demand in China resurfaced despite tighter supply signals from OPEC+. “Gold was broadly steady, with safe-haven flows softening.”
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Rand remains volatile
They say the rand traded mostly sideways, holding in the $17.6–17.7/$ range. “Midweek, it slipped as a firmer dollar and Fed policy concerns weighed on sentiment. This morning, the local currency was muted again, with markets waiting for key US PCE inflation data, local trade and budget numbers.
De Schepper also notes that the rand fell against the dollar to R17.72/$, down 1.5% from the previous week. The rand gained 2.67% since the start of the month, supported by expectations of a narrowing interest rate differential and positive sentiment towards South African bonds, she says.
The rand was trading at R17.69/$ on Friday afternoon.
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Producer price index performs as expected
According to Statistics SA, inflation in factory gate prices, as measured by the Producer Price Index (PPI), accelerated to 1.5% in July from 0.6% in June, says Tshepiso Maroga, an economist at the BER. “The uptick was in line with expectations and marks the highest reading since August 2024.
“On a monthly basis, the PPI rose by 0.7%, compared to 0.2% in the previous month. The increase was mainly driven by an increase in food products, beverages and tobacco products.”
Nkonki and Matshego say the outcome was also in line with their expectations, but slightly higher than the market’s forecast of 1.4%. “We expect producer inflation to increase further while remaining relatively subdued, averaging below 3% in 2025 before gaining momentum in 2026.
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole, and Koketso Mano, economists at FNB, forecast an average of around 1.2% in PPI for this year, rising to about 3% in 2026.
