With the US crisis out the way and Europe on a steady footing, there is little in the way of global concerns. There was more rand friendly news out the US last week in the form of nonfarm payrolls for September, the number come in lower than expected (148k) vs Bloomberg consensus forecast of (180k). As a result, the Top 40 Index reached a new all time high of 40,544.20 points. With the Top 40 Index as all time highs, the attractive investment would be the Standard Bank Capital Accumulator 60 month investment which offers a potential 46% return. Alternatively, the Strategic Wealth Solutions Accelerator with 100% capital protection is the ideal investment vehicle for the bullish investor.
The October FOMC meeting will be held on Wednesday; the Committee’s decision will be announced then and the market expects that the Fed will leave the pace of its asset purchases unchanged. Consensus now puts the start to QE tapering at March 2014. The current drift in dialogue among market participants and commentators remains towards pushing the deadline out. If the deadline is pushed out, the market’s response will probably hinge on what the Fed says. The market suspects that the pace of job creation would need to lift materially, and on a sustained basis, for the Fed to believe that the economy was ready for stimulus withdrawal.
Locally, M3 money supply is expected to have grown to 7.46% y/y in September. Conversely, after having surprised notably to the upside in August, its expect growth in private sector credit extended to have cooled in September to 7.57% y/y. Base effects are likely to impede growth for corporate general loans and advances, while we expect symptoms of household credit fatigue to linger. In a quarter of improving q/q economic growth, SA registered net job gains of 100,000 in Q2:13. However, these job gains were outpaced by labour force growth (of 222,000), resulting in an uptick in the official unemployment rate to 25.6% from 25.2% in Q1:13. We expect the official employment rate to have continued to oscillate around this key 25% mark in Q3:13.
PPI for final manufactured goods has been on a decidedly upward trajectory, most recently culminating in a fourth consecutive uptick in y/y momentum in August. Prospects for tamer imported (as well as headline) PPI in September were likely supported by rand strength in September.The trade deficit for September is expected to have remained wide, and deeply in deficit, albeit narrowing only slightly from the August print, at R17bn. Exports are not expected to have improved significantly in September 2013, impacted by the strike in the automotive sector.
The PMI slumped badly in September as the impact of widespread strike action in the motor sector affected confidence. With the strike having come to an end in October, the PMI may have seen some consolidation in October. Domestic vehicle sales growth will have to surmount a notably high base in October to stave off a repeat of the negative y/y growth seen in September. Lacklustre instalment sales credit growth as well as escalating price pressures also present a challenge to incremental vehicle sales.
*Article Compliments of Standard Bank CIB