On the upside - lower fuel price could add GDP growth and curb inflation
In the meantime the oil price has crashed as worldwide production continues increasing (specifically in the US and Russia).
This is great for SA.
The R1.84 drop in the fuel price for December could add 1% economic growth to South Africa in 2019.
At the same time, it will see inflation significantly lower. October saw inflation hit 5.1%, and the November figure will probably be even higher due to the high fuel price increases we saw back then.
But this drop in the fuel price will definitely lower inflation.
And the great thing is, lower inflation = lower interest rates.
Lower interest rates in turn will help consumers buy more as their disposable income will be higher. This is good, because at its last sitting the SARB raised interest rates because of inflation risks.
But lower oil, and a stronger rand means lower inflation. I believe this will put a stopper ahead of the SARB’s interest rate hiking plans.
Other economic indicators showing further economic recovery
South African retail sales rose 0.7 percent year-on-year in September after increasing by 2.5 percent in August.
This supports third quarter GDP growth – and a rise out of the recession.
And according to the National Association of Automobile
Manufacturers of South Africa (NAAMSA) “November export vehicle sales had turned in another positive performance and at 34 352 vehicles had registered an improvement of 824 units or a modest gain of 2.5% compared to the 33 528 vehicles exported in October last year.”
Simply put – things are slowly turning up. Our economy is looking better. Corruption is being addressed by the Ramaphosa administration.
There’s reason for optimism.
So while our economy will recover and things are getting more positive – there will still be ‘potholes’ looming in the future which you will have to navigate as an investor…
Where should you invest to make the most of this looming recovery?
I would stay clear of the construction industry and be very selective with mining companies. Small and BEE empowered miners are safe – but the big ones without the right credentials will continue to attract government meddling.
Then I am very excited about IT, transport, alternative energyand recycling companies for 2019.
There is a clear trend of consumers spending more on online sales (2018 growth was more than 25% with online sales hitting R14 billion). That means opportunities for IT companies, payment portals, courier companies and the like.
And then as people become more aware of environmental issues, and Eskom loadshedding, solar and wind power will continue to thrive…
And companies that recycle metals, garbage and even produce electricity from garbage will get more opportunities in 2019.