Last week, US markets were spooked after tariffs against Canada and Mexico came into effect, with the S&P500 seeing its worst sell-off of the year in response to the news. Locally, although the Q4 GDP numbers showed a rebound from the contraction reported in Q3, the reported growth was still lackluster.
International Market Developments
The U.S. imposed 25% tariffs on most Canadian and Mexican imports and a further 10% on Chinese goods, affecting $1.5 trillion in trade. The S&P 500 saw its worst sell-off of the year after President Trump confirmed the tariffs. Canada and China retaliated, with China imposing up to 15% levies on U.S. agricultural products. Trump warned of further tariffs, though U.S. Commerce Secretary Howard Lutnick suggested some could be reversed. American car manufacturers were granted a one-month exemption, and goods meeting the 2020 free trade deal rules also received a temporary reprieve. Despite these policy shifts, concerns remain that tariffs may slow U.S. growth. Traders have now fully priced in three Federal Reserve rate cuts in 2025, with the first possibly in May, even as tariffs may drive inflation higher. The situation remains fluid, with potential economic consequences for global trade, markets, and monetary policy.
The labour market showed signs of further moderation in February. Payroll employment rose 151,000, a modest uptick from January. Healthcare continues to lead the charge on job growth, while gains in the public sector have slowed and leisure/hospitality shed jobs for the second straight month. The average gain over the last three months slowed to 200,000 but is still being buoyed by an outsize gain in December. The household survey was more downbeat as the labour force participation rate fell to 62.4%—the lowest since January 2023—and the unemployment rate edged higher to 4.1%.
Looking ahead, the Bank of Canada (BoC) meets on Wednesday. The BoC cut its policy rate by 25bps in January and is expected to continue easing in 2025 to mitigate the negative impact of US tariffs on the economy.
Local Market Developments
Last week, most of the domestic data releases were a bit disappointing. As reported in the GDP numbers, the South African economy expanded by 0.6% in Q4 2024, recovering from a revised 0.1% contraction in Q3. While the growth fell short of the 0.9% forecast, it was enough to prevent the country from entering a recession. Three sectors showed positive growth, with agriculture (+17.2%) contributing the most, followed by trade (+1.4%) and finance (+1.1%).
Looking ahead, the National Budget is scheduled to be tabled on Wednesday. A statement from last week’s special cabinet meeting suggests that the cabinet provided its final input and the Finance Minister and National Treasury are ready to table the budget.