Prowess Investments Market Update 22nd – 29th Apr 2024

The US Fed’s FOMC meeting is in the spotlight this week, with the Committee expected to keep interest rates unchanged given uncertainty about inflation slowing down, with the latest CPI and core PCE data indicating that price pressure continues to be sticky.

Locally, the SARB expects the near- and medium-term outlook for GDP growth in South Africa to improve. This will come as load shedding eases and energy availability in the country improves quicker than previously projected.

International Market Developments

The US Fed is expected to keep interest rates unchanged at Wednesday’s meeting and to also indicate that fewer interest rate cuts are likely this year. This comes after the US core PCE price index, the Federal Reserve’s preferred gauge to measure inflation, rose by 2.8% from the previous year in March 2024, the lowest level since March 2021. The figures came above market forecasts of 2.6%, however, monthly core PCE prices advanced by 0.3% in March, matching February’s reading and in line with market estimates.

US GDP growth undershot expectations in Q1:24 increasing by 1.6% q/q (annualised), after having increased by 3.4% q/q (annualised) in Q4:23. This represents a slowdown in growth to the weakest levels since Q2:22, driven largely by consumer spending, residential and non-residential fixed investment, and state and local government spending.

Local Market Developments

The SARB’s latest Monetary Policy Review for April 2024 reported that the bank had cut the scale of the negative impact it expected the South Africa’s economy to take due to load shedding. Their forecast is for GDP growth for this year to accelerate modestly as supply-side constraints such as load shedding ease. Loadshedding is estimated to have taken 1.5 percentage points off gross domestic product last year and is expected to moderate to 0.6 percentage points this year and 0.2 percentage points in 2025.

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