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September 2021 economic update

The rand recently hit a new low and seems to continue weakening.
  • The South African GDP has grown by 1.2% in the second quarter of 2021, which is an improvement of 19.3%. A great improvement in our economy. However, the CPI increased by 0.8% in September compared to August, and this is due to rising costs of electricity, fuel, and food prices.
  • Approximately 8 000 full-time jobs, 28 000 indirect jobs are expected to be created because of the N2 Wild Coast Road project. This contrasts with the increase in job losses in the second quarter, seeing about 86 000 jobs lost in the formal sector.
  • South Africa will have to spend approximately R3.2 trillion to battle climate change because of global warming, which could have an impact on government spending and the overall fiscal policy.
  • Amid municipal elections in South Africa, there is a fear that the campaigns made by politicians may lead to an increase in Covid-19 cases, which is why experts advise that campaigns be held outdoors. 
  • The South African Health Products Authority recently approved the Pfizer Covid-19 jab for 12-year-olds and above, which is a positive direction towards fighting this virus.
  • America needs to prepare for the worsening of stock market performance as strategists at almost all the top Wall Street banks indicate concerns over the market’s vulnerability. This is reflected in the S&P 500 falling by 1% for three days in a row, the Dow falling by 68.93 points, and equity valuations being extremely low.
  • The United Kingdom (UK) is struck by a fuel crisis caused by a lack of truck drivers; therefore, the UK government has given priority to essential workers. The army has been put on standby to deal with the panic of buying fuel.
  • South Africa is one of the countries on UK’s “red list of entry”. This means that upon arrival, foreigners would be required to quarantine in hotels at their own cost. This has caused fury and confusion in South Africa because it will significantly affect the tourism industry.
  • From July to September the UK economy showed signs of recovering from their recession, however, growth started becoming slower in September.
  • The rand has been doing well for the past three weeks of September, but it recently hit a new low and seems to continue weakening. On  September 30 it traded at R15.17/$, R20.39/£, R17.56/€.
  • The performance of the rand seems to be affected by the reduced risk for developing market assets and the rise in oil prices. South Africa is largely affected by the increase in oil prices as we import oil and petrol which account for almost 5% of the country’s inflation basket.
  • The Chinese economy seems to be growing slowly and that means their demand for products may decrease. This affects the rand because China is one of the largest buyers of South African commodities and South Africa benefits from the high commodity prices.
  • China is also facing a power crisis as manufacturers rush to meet the demand for year-end holiday shopping. This has led to China facing power cuts in some of the largest powerhouses in China which together account for almost a third of the nation’s GDP.
  • The S&P 500 declined by 4.8% in September, this is the worst month since March 2020.
  • The Euro Stoxx600 rose on Wednesday by 0.6%, which is good as it previously faced a 2.2% fall in the previous session.
  • On September 24 the FTSE 100 index was at 7 051.48 points, which was above its average of about 6735.32 for 2021.
  • One month index movements:
    • JSE All Share Index: -4.67%
    • S&P 500 (US): -4.76%
    • FTSE (UK): -0.47%

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Michael Haldane

Global & Local Investment Advisors

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