Global financial markets remain focused on the US government shutdown, while locally, South Africa’s trade balance registered a smaller-than-expected surplus in August.
International Market Developments
The US government shutdown that began on 1 October shows no signs of ending soon, raising concerns about delays in key economic data releases. This disruption could hinder the FOMC’s ability to assess the state of the economy accurately as alternative data sources are poor substitutes for official statistics. If the shutdown continues for more than three weeks, the September CPI report which is scheduled for 15 October will likely not be released. The collection of October employment data would also be affected.
House Speaker Mike Johnson said that the shutdown provides an opening to “do some things that we would not otherwise be able to do, because we would never get Democrat votes for them”. The Trump administration halted $18bn in federal funding for infrastructure projects in New York City and threatened to cut $8bn from renewable energy projects in more than a dozen states. Moderate Republicans and Democrats are reportedly trying to search for a way out of the shutdown that could offer face-saving concessions to both parties.
The Fed’s FOMC minutes from its September meeting will be released on Wednesday. Investors are keeping an eye on the minutes for signs of the pace of further interest rate cuts. Fed President Lisa Cook has indicated that she is unlikely to support another interest rate cut at the Fed’s next meeting with inflation running above the 2% current target. She further added that she expects tariffs to lead to higher inflation in the coming months.
Local Market Developments
The SA trade balance registered a smaller-than-expected surplus in August. The trade surplus shrunk to R4.0bn, from a downwardly adjusted R19.6bn in July. Exports decreased 6.8% m/m, to R171.3bn, whilst imports increased 1.9% m/m, to R167.4bn. Lower export values of gold, unwrought aluminum, and diamonds were recorded in August. Import flows increased on the back of higher importation of original equipment components, automatic data processing machines, and airplanes.
The year-to-date trade surplus of R101.8bn is lower than the R121.4bn surplus for the comparable period in 2024.