Prowess Investments Market Update 6-14 November 2023

Early this week, lower-than-expected US CPI for October dominated the headlines raising market expectation of a Fed  interest rates cut in the first half of 2024. Locally, stronger-than-expected employment gains saw the unemployment rate fall 0.7% to 31.9%, back to pre-Covid-19 levels.

International Market Developments

Last week saw several Fed policy makers commenting on the likely path for monetary policy. Even though inflation is showing signs of moderating, they reiterated their commitment to ensuring that interest rates are high enough to bring inflation down and they are not confident that they have achieved that stance.

CPI for October printed at 3.2% y/y, from 3.7% y/y in September. Month by month, CPI came in at 0% in October, the lowest level in 15 months after having increased by 0.4% in September. Core CPI also came in lower than expected in October, at 4.0% y/y, after having increased by 4.1% y/y in September. This moderation in inflation reflects the impact of declining global energy prices.

Local Market Developments

The SA unemployment rate fell more than expected in Q3:23 to 31.9%, from 32.6% in Q2:23. 399,000 jobs were created in Q3:23 taking the total number of employed people to 16.745 million, above pre-pandemic levels. The number of unemployed fell by 72,000 in Q3:23 but remains at very high levels at 7.849 million. Based on the expanded definition, the unemployment rate fell further to 41.2% in Q3:23, from 42.1% in Q2:23.

Electricity Minister Kgosientsho Ramakgopa commented last week that SA is accelerating the deployment of up to 3 GW of gas-fired power generation capacity. The 3 GW of planned gas-powered capacity will help plug the energy deficit. The project is currently at procurement stage and includes a 2 GW mobile facility as well as a 1 GW gas-to-power plant located near Coega in the Eastern Cape.

Local mining production declined less than expected in September, falling by 1.9% y/y, following an upwardly revised decline of 2.0% y/y in August.  Manufacturing production also contracted more than expected in September, by 4.3% y/y, after having increased by a downwardly revised 1.5% y/y in August.

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