Public holidays… Trade balances… And unemployment: A look at the economic news that was and what to expect in the week to come

 

For one, our trade balance came in worse than expected. One of the culprits behind this mess is Eskom. 

 

This monopoly electricity producer has been importing fuel to boost supply for ages. And it’s something that would’ve been a non-issue if it had completed the power plants it is currently building on schedule.

 

African Bank also made stock market headlines for a number of reasons this week. 

 

First, because of a suspicious rise in the share price before a positive SENS announcement for the stock. (As I write this article, the JSE is determining whether or not to request an investigation.) And secondly, because the unsecured lender released some rather troubling news at the end of the week when non-performing loans spiked more than expected. This confirms something I’ve been saying for some time: the South African consumer is in trouble. 

 

Speaking of the South African consumer, next week’s economic releases are sure to shed further light on the subject….

 

Next week is yet another shortened week due to election, but there are still a few stock market releases to watch out for. 

 

On the local front, PMI and unemployment numbers come out at the start of the week. Local unemployment rarely affects our market, but it should give us some idea as to the strength of the economy. My prediction is for the unemployment rate to remain relative unchanged at just above 24%.

 

When it comes to PMI, ours aren’t the only ones you need to consider. 

China will also release PMI numbers next week. These are the unofficial HSBC numbers, which are usually a little lower than the official figures. Expectations are for them to show slower growth. 

 

Then, later in the week we’ll get the country’s official trade balance as well as inflation numbers. Expectations are for both Import and Exports to fall while inflation remains just above 2%. Although Chinese growth rates have missed estimates recently, we haven’t seen a knee jerk reaction by the government to stimulate the economy. If this doesn’t happen soon, expect our resource companies to come under increasing pressure as their main source of incremental demand slows.

 

And finally from Europe, we’ll get rates decisions from both the BoE and the ECB. 

 

Expectations are that neither will change their current rate policy, but there’s a chance that the follow-up interview with the ECB’s Mario Draghi may give some hint at the committee’s stance on a European version of QE. This seems warranted as the unemployment rate for the region remains close to 12%, while inflation remains below 1%. Even a very slight hint of such action will be very significant for global markets. 

 

As you can see, we’re in for a bumper week of stock market news next week. Keep an eye on the papers – despite the mid-week public holiday – to make sure you know what’s going on and how it’ll affect your JSE shares. 

 

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