Consumer confidence is not doing great in South Africa, while PPI also did not shoot the lights out.
After the central bank bonanza of last week, the past week was less eventful on the monetary policy front, although various data releases emphasised that our economy is in trouble.
Bianca Botes, director at Citadel Global, notes that Brent crude oil was edging toward $70/barrel this morning, an eight-week peak and on course for its best weekly performance since early June.
“Renewed geopolitical tensions are driving supply anxiety with US president Donald Trump pressing Turkey’s president Tayyip Erdogan to stop buying Russian oil, part of a broader strategy to squeeze Moscow’s energy revenues amid the war in Ukraine.
“At the same time, Ukrainian strikes on Russian energy facilities earlier in the week forced Moscow to tighten export restrictions. Russian deputy prime minister, Alexander Novak, confirmed that the partial ban on diesel exports will remain in place through year-end, alongside an extension of curbs on gasoline shipments, as refinery outages created shortages across several fuel products.”
Still, she says, the rally was capped by the resumption of Kurdish crude exports and fading expectations for aggressive US rate cuts, which limited the demand outlook.
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Gold and rand standing by as safe havens
Botes also points out that gold softened to roughly $3,740/ounce, weighed by a firmer dollar after stronger US data reduced the odds of near-term Fed easing. The rand also softened to R17.43/$ on the back of a stronger greenback. “The local unit will continue to take its cues from the global backdrop.”
Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, noted that Brent crude oil prices did firm to $70.28 per barrel due to tighter supply signals and lower US inventories. Gold and platinum gained due to stronger demand for basic materials.
They say the rand gave up some of its recent gains, closing around R17.41/$ – its lowest level since 10 September – as the US dollar firmed across the board due to hawkish Fed commentary, stronger-than-expected GDP data and resilient US labour market numbers. “Locally, the rand barely moved after higher-than-expected PPI data.
The rand was trading at R17.36 this afternoon.
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Consumer confidence could not sustain recovery into the third quarter
After a sharp rebound in the second quarter, the FNB/BER Consumer Confidence Index retreated to -13 in the third quarter, down from -10 in the previous quarter. This reversal was mostly driven by a slump in middle-income households’ confidence (from -7 to -16).
Two out of three sub-indices deteriorated, with only the sub-index tracking the appropriateness of the present time to buy durable goods improving, supported by further easing in the lending rate.
Nomvelo Moima, economist at the Bureau for Economic Research (BER) says looking ahead, the consumer confidence index points to retail sales during the third quarter still benefiting from some consumer resilience, particularly at the higher end.
“However, weak confidence among middle- and low-income households will likely translate into a more notable slowdown in consumer spending over the second half of the year.”
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say despite the figure being an improvement from the exceptionally low -20 recorded in the first quarter, the current reading remains well below the historical average of -1 since 1994, suggesting a slowdown in real household consumption growth.
“The decline was mainly due to worsening perceptions of household finances and the economic outlook, although the time-to-buy-durable-goods sub-index slightly improved, supported by a 25-basis-point interest rate cut and a stronger rand.”
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Producer Price Inflation reaches one-year high in August
Headline producer price inflation (PPI) for final manufactured goods quickened from 1.5% to 2.1% in August. Moima says this acceleration was faster than the consensus forecast (1.8%) and the BER’s expectations.
Nkonki and Matshego expect PPI to edge higher in the coming months, reaching around 4% by year-end, largely due to base effects. “The main upward pressure will stem from food, particularly meat prices, which remain elevated due to the lingering impact of foot-and-mouth disease.
“Still, the upside for food prices should be capped by higher field crop production supported by favourable weather. Fuel prices, which have been in deflation for a year, will also turn positive. On balance, PPI will remain relatively subdued, averaging around 2% in 2025 before gaining momentum in 2026.”
