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Economic Update Locally, manufacturing production growth decreased by a more moderate1.2% y/y in August after falling by a revised 8.1% in July. M/m, seasonally adjusted, production grew by 2.2% in August based on an increase in production of16.2% m/m (+3.3pp) of basic iron and steel and a 16.6% (+1.4pp) rise in the production of motor vehicles, parts and accessories. However, six of the ten manufacturing sub-divisions tracked by Stats SA indicated contractions in production in August, the most notable declines being food and beverages (-5.3% m/m, -1.3pp); wood, paper, publishing and printing (-5.5%, -0.5pp) and petroleum, chemical, rubber and plastics (-0.8%, -0.2pp). Looking ahead, the moderation in manufacturing production growth in August is welcome, although there is still risk that the sub-sectors continue to contract both y/y and m/m for the remainder of the year which would mean that manufacturing activity will have to register a large growth of at least 8.0% m/m in September for this sector to contribute positively to Q3 GDP. Given the still relatively modest trends in the PMI business activity indicator in September (index level of 53.0), this is probably an unlikely ending and the key productive sectors of mining and manufacturing are likely to contribute negatively to Q3 GDP growth. Offshore, the IMF revised down South Africa’s growth forecast for 2014 to 1.4% from 1.7% in April 2014. This is exactly in-line with our own forecast. The Reserve Bank’s forecast is for South Africa’s GDP to grow by 1.5%, while the National Treasury has a forecast of 1.8%. For 2015, the IMF revised South Africa’s growth outlook down to 2.3% from 2.7% in April 2014. This is slightly below our own forecast of 2.4%, and the Reserve Bank’s forecast of 2.8%. The IMF have revised down most country’s growth estimates for 2014 and 2015, especially the Euro-area, Japan, Russia, Brazil, and the Middle East. In contrast the growth outlook for India, Canada, Mexico, and the United States have been revised up somewhat. The IMF is still fairly optimistic about the growth outlook for Sub-Saharan Africa despite the spread of Ebola. Kevin Lings is currently at the IMF Annual General Meetings in Washington and an additional update on the outcomes of the IMF and IIF annual meetings in Washington will be the main theme next week. In the emerging markets, in a recent communication by the Reserve Bank of Zimbabwe an announcement was made that the country was importing US$ 45 million worth of coins. The main purpose of the operation is to smooth transactions in the country as it faces shortages of coins in some areas. According to the document some consumers were given sweets and vouchers instead of change because of the shortage. What aggravated that matter was that the Bank of Botswana announced that it was phasing out its current coins for new coins which resulted in businesses no longer accepting Pula coins. The previous attempt of importing coins failed as the freight costs of the exercise was more than the value of the coins. In that US$45 million dollars, US$ 25 million will be Rand denominated coins and the outstanding US$20 million will be special coins to be pegged to the US Dollar coins but will be minted in South Africa. The Reserve Bank re-iterated that this is not a way to re-introduce the Zim Dollar. The impact on inflation is expected to be minimal and short-lived as the value of the coins is less than 1% of GDP and the country is facing deflationary pressures from a slowing economy. Delivery of the first batch of coins is expected in November. Headline inflation in Kenya eased to 6.6% for the month of September and is the first time the inflation rate dropped in 5 months. This is down from the 8.36% registered in the previous month and is the lowest inflation has been since April 2014 with most food categories registering a price decrease on a monthly basis. The sharp reversal in the inflation rate is as a result of the base effects from the increase in the taxes introduced in September 2013 wearing off. The upward trend in the inflation rate is expected to continue though. This gives the Central Bank of Kenya some breathing space in terms of keeping monetary policy stable at current levels and we expect rates to be kept on hold for the rest of the year. Please follow our regular economic updates on twitter @lingskevin Kevin Lings, Laura Jones & Kganya Kgare (STANLIB Economics Team)
Weekly Market Analysis Currencies/ Indices/ Commodities Friday’s Close 10/10/14 Weekly Move (%) YTD (%) Indices *MSCI World – US Dollar 1626.68 -2.90 -2.07 *MSCI World – Rand 18074.21 -4.74 5.11 *MSCI Emerging Market – US Dollar 989.87 -0.74 -1.28 *MSCI Emerging Market – Rand 10998.54 -2.62 5.96 All Share Index – US Dollar 4237.81 -1.23 -5.18 All Share Index – Rand 47092.25 -3.13 1.81 All Bond Index 467.55 1.52 7.07 Listed Property J253 1583.80 0.25 13.49 Currencies US Dollar/Rand 11.11 -1.92 7.37 Euro/Rand 14.04 -1.11 -2.69 Sterling/Rand 17.86 -1.29 2.94 Euro/US Dollar 1.26 0.90 -8.11 Commodities Oil Brent Crude Spot Price ($/bl) 89.91 -2.04 -18.85 Gold Price $/oz 1223.61 2.73 1.50 Platinum Price S/oz 1262.50 3.06 -7.98 Source: I-Net Bridge * MSCI - Morgan Stanley Capital International
Page 1 and 2: 13 October 2014
Page 3 and 4: Newsflash Pessimism on world market
Page 5: BCA RESEARCH Conventional wisd
Page 9 and 10: STANLIB Extra Income Fund Effective
Page 11 and 12: Equity Financial Markets Fixed Inte
Page 13: Disclaimer The price of each unit o

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