Price Inflations

Producer inflation often precedes consumer inflation, serving as a leading indicator of future consumer price changes. When producer costs rise, these are typically passed on to consumers. Producer inflation peaked at 18.0% in July 2022 but has since declined to 4.6% in June 2024, mirroring the trend in consumer inflation. However, the forecast for July 2024 shows an increase to 5.0% year-on-year, driven by higher administered prices, such as water and electricity, and a lower base effect from the previous year.

Trade Balance

Exports and imports are crucial to South Africa’s economy. We mainly import finished goods, particularly high-end consumer products, while our exports consist largely of raw commodities and materials. Over the past year, South African demand has been subdued as consumers have faced rising living costs, higher interest rates, and increased levels of debt.

In June 2024, the demand for machinery, vehicles, and mineral products declined more sharply than the decrease in the Rand value of key export categories like mineral products, precious metals, base metals, and machinery. This led to South Africa recording a trade balance surplus of R24 billion for that period.

Trade figures for both imports and exports are highly volatile and difficult to predict. Nonetheless, it is anticipated that South Africa may see another trade balance surplus in July, estimated to be between R19 billion and R23 billion. This forecasted surplus is heavily dependent on trade flows with other countries.

Credit Demand (Private Sector Credit Extension – PSCE)

Credit demand is a key economic indicator, measured by the growth in the monthly Private Sector Credit Extension (PSCE) report from the SARB. The PSCE report tracks credit demand across various categories and is sensitive to interest rates, market conditions, and overall economic health. In 2024, credit demand has remained low, with an average growth rate of 3.5% in the first quarter and 3.9% in the second quarter. In June, credit demand grew by 4.3%. We estimate that the PSCE will likely grow by 4.5% year-on-year in July, slightly higher than June’s growth. The largest PSCE category, “Mortgage Advances,” grew by only 2.9% in June, with an expected growth of 3.0% in July. Slow credit growth is expected to persist in the short term due to high interest rates and household indebtedness.