United States of America The U.S. economic outlook is healthy according to the key economic indicators. The U.S. economy grew by an annualised 2.1 percent in Q3, following a 2.0 percent expansion in the previous three-month period. according to the most recent forecast released at the Federal Open Market Committee meeting U.S. GDP growth is expected to slow from 2.2 percent in 2019 to 2.0 percent in 2020 and is expected to slow further to 1.9 percent and 1.8 percent in 2021 and 2022, respectively. Taking a closer look at some of the indicators, the IHS Markit US Manufacturing PMI was revised slightly lower to 52.4 in December 2019 from 52.6 the previous month. The US annual inflation rate increased to 2.1 percent in November 2019 from 1.8 percent the previous month, and above market consensus of 2.0 percent. The Federal Reserve left the target range for its federal funds rate unchanged at 1.5-1.75 percent at its December meeting, agreeing that the current interest rate stance is likely to remain unchanged for a time. In political matters, the House of Representatives voted to impeach President Trump on December 18th. Impeachment hearings have begun but given that the Republicans control the Senate it is unlikely Trump will be removed from office.
UK The British Chambers of Commerce’s (BCC) latest quarterly economic snapshot, based on a poll of 6,500 firms across the country in November, painted a gloomy picture of the economy at decade end. The BCC is forecasting a slowdown in economic growth to 0.2 percent in the final three months of 2019, falling from 0.3 percent in the third quarter, with the Bank of England estimating growth at just 0.1 percent in the fourth quarter. The IHS Markit/CIPS UK Manufacturing PMI came in at 47.5 in December 2019 - well below the previous month's 48.9. Consumer price inflation in the United Kingdom held steady at 1.5 percent year-on-year in November 2019, the lowest level since November 2016 but slightly above market expectations of 1.4 percent. The Bank of England's Monetary Policy Committee voted by a majority to hold the Bank Rate at 0.75 percent during its December policy meeting, as policymakers took a wait-and-see approach following Prime Minister Boris Johnson's election victory and its possible implications for Brexit. This electoral outcome cleared uncertainty around Brexit, leaving consumers feeling more optimistic and confident. The GfK consumer confidence index in the United Kingdom improved to -11 in December 2019, up from -14 the previous month. In politics, the Conservative Party won an absolute majority in the December elections and, as a result, the UK is expected to leave the EU by January-end. Europe Euro area gross domestic product is expected to expand by 1.1 percent in 2019 and by 1.2 percent in 2020 and 2021. Final estimates showed the IHS Markit Eurozone Manufacturing PMI easing to 46.3 in December 2019 from 46.9 in November. Consumers were more subdued during December, with the consumer confidence indicator falling 0.9 points to -8.1, down from -7.2 in November, though markets had expected the level to raise to -7.0. More positively, the inflation rate was confirmed at 1.0 percent in November 2019, higher than October's near three-year low of 0.7 percent and closer to the ECB’s 2 percent goal. The ECB left its key interest rates and stimulus package unchanged during Christine Lagarde's first policy meeting in charge on December 12th, leaving the main refinancing rate at 0 percent and the deposit rate at -0.5 percent. Policymakers said they expect interest rates to remain at their present or lower levels until the inflation outlook converges to their goal. On the political front, the Conservative Party’s resounding victory in the UK elections on December 12th signalled a clearer Brexit roadmap ahead, reducing related uncertainties.
China China’s economy is slowing, reflecting both cyclical factors and longer-term structural trends. Growth is estimated to decelerate to 6.1 percent in 2019 with further moderation to 5.9 and 5.8 percent in 2021 and 2022, respectively. The Caixin China General Manufacturing PMI eased to 51.5 in December 2019 from 51.8 the previous month, though markets had forecast an unchanged reading. China's annual inflation rose to 4.5 percent in November 2019 from 3.8 percent the previous month, which was above market expectations of 4.2 percent and the highest inflation rate level since January 2012. The People’s Bank of China announced that it will lower bank reserve requirements by 50 basis points, a move that should help smooth liquidity conditions ahead of an earlier-than-usual lunar new year holiday period later in January. On the political front, President Trump agreed to a limited trade deal with China on December 13th, effectively barring a fresh round of tariffs that were to be implemented on December 15....
South Africa South Africa continues to struggle along as power problems at Eskom continue to persist, with more than a quarter of the country’s generating capacity breaking down in December. Continued load shedding has aided a sharp decline in manufacturing output and further drops in both new and export orders. The IHS Markit South Africa PMI declined to 47.6 in December of 2019 from 48.6 the previous month, which was the eighth successive month of contraction in private activity and the steepest decline in 14 months. South Africa's trade surplus widened to ZAR 6.10 billion in November 2019 from ZAR 2.75 billion the previous month and hit above market expectations of ZAR 5.00 billion. South Africa's current account deficit narrowed to ZAR 190.3 billion in Q3 2019 from an upwardly revised ZAR 208.7 billion in the previous period. The substantial current account deficit combined with a widening budget deficit should keep pressure on the rand exchange rate for the near future. More positively, the annual inflation rate in South Africa decreased to 3.6 percent in November 2019 from 3.7 percent the previous month, matching market expectations.
Fund Update GCI SCI Flexible FoF The allocation to PSG Flexible was halved and was allocated to Kagiso Balanced during the quarter. Over the quarter the portfolio underperformed its benchmark of the average of peers in the (ASISA) South African MA Flexible category and outperformed the CPI+5% target.
Investments to be included in the portfolio will, apart from assets in liquid form, consist solely of participatory interests in portfolios of collective investment schemes registered in the Republic of South Africa. The portfolio will consist of a mix of collective investment scheme portfolios investing in equity, bonds and property and money market instruments. The portfolio will also be allowed to invest in listed and unlisted financial instruments (derivatives) as allowed by the Act from time to time. The Manager shall be permitted to invest on behalf of the portfolio in offshore investments as legislation permits.