Our monthly To the Point column by economist Dr Roelof Botha offers in-depth analysis and commentary on the latest economic trends, market developments, and financial news. Designed to keep you informed and ahead of the curve, each edition delves into key economic indicators, explores their impact on global and local markets, and provides insights to help you navigate the ever-changing economic landscape.
What does a rate cut mean for investors? The quote often attributed to Albert Einstein acts as a good starting point – “Compound interest is the eighth wonder of the word. He who understands it, earns it; he who doesn’t, pays it”. Put simply – interest is earned on money in the bank, but paid on debt owed.
Our monthly To the Point column by economist Dr Roelof Botha offers in-depth analysis and commentary on the latest economic trends, market developments, and financial news. Designed to keep you informed and ahead of the curve, each edition delves into key economic indicators, explores their impact on global and local markets, and provides insights to help you navigate the ever-changing economic landscape.
Households and businesses with debt would have been disappointed at the decision by the Monetary Policy Committee (MPC) of the Reserve Bank to maintain the official bank rate at 8.25% (and the prime rate at 11.75%) during their July policy meeting. Fortunately, some good news filtered through less than a week later with the publication by Statistics S.A. of the latest inflation rate, as measured by the consumer price index (CPI). This rate declined marginally to 5.1% in June (from 5.2% in May).
The decline of more than 140 basis points in South Africa’s ten-year bond yield in the aftermath of the recent elections holds the promise of hastening the imminent lowering of the Reserve Bank’s repo rate. The chances for an easing of lending rates happening sooner rather than later have also improved for other reasons, mainly because of further declines in the producer price index (PPI) and the food price index, both of which act as leading indicators of the consumer price index (CPI).
A welcome year-on-year increase in capital expenditure by selected private sector industries was recorded in the first quarter of 2024, with the asset category for plant and equipment once again in pole position. Between January and March, this asset group witnessed capital expenditure of almost R52 billion, a slight increase over the figure of R51 billion recorded in the first quarter of 2023.
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