QB March 2011
Presentation by the South Presentation by the South African Reserve Bank to the African Reserve Bank to the
Portfolio Committee on Portfolio Committee on FinanceFinance
Quarterly Bulletin March 2011
13 April 2011
Brent crude oil prices
International oil prices have risen sharply in the wake of tensions in International oil prices have risen sharply in the wake of tensions in the Middle East and North Africathe Middle East and North Africa
Real gross domestic production increased further in the Real gross domestic production increased further in the fourth quarter of 2010…fourth quarter of 2010…
Real gross domestic product
……reflecting positive growth in the three main sectors of the economy reflecting positive growth in the three main sectors of the economy
Real gross domestic product by main sector
At the same time, domestic final demand continued to At the same time, domestic final demand continued to grow at a steady pacegrow at a steady pace
Final demand
While household debt increased somewhat, household While household debt increased somewhat, household debt and the debt service cost of households receded debt and the debt service cost of households receded
relative to disposable income relative to disposable income
Household debt and debt-service ratios
The pace of employment creation picked up in the fourth quarter of 2010
Formal non-agricultural employment
Total
Private sector
Public sector
Nominal remuneration increases continued to exceed Nominal remuneration increases continued to exceed consumer price inflationconsumer price inflation
QB March 2011
Wages and targeted inflation
Consumer goods price inflation as well as producer price inflation Consumer goods price inflation as well as producer price inflation accelerated recentlyaccelerated recently
The current-account deficit narrowed significantly in the final The current-account deficit narrowed significantly in the final quarter of 2010 which largely reflected a larger trade surplus…quarter of 2010 which largely reflected a larger trade surplus…
Balance of payments: Current account
Balance on current account
Service, income and current transfer account
Trade account (exports minus imports)
……in turn assisted by a surge in international in turn assisted by a surge in international commodity pricescommodity prices
International prices of selected South African export commodities
The nominal effective exchange rate of the rand declined The nominal effective exchange rate of the rand declined somewhat in January and February 2011 before strengthening somewhat in January and February 2011 before strengthening
again in Marchagain in March
Effective exchange rate of the rand
Growth in money supply regained some momentum Growth in money supply regained some momentum during the second half of 2010during the second half of 2010
Growth in M3
M3 deposit holdings of the corporate sector picked up noticeably in 2010 M3 deposit holdings of the corporate sector picked up noticeably in 2010 while that of the household sector remained subduedwhile that of the household sector remained subdued
M3 holdings of households and companies
Banks’ loans and advances started a modest recovery Banks’ loans and advances started a modest recovery during the second half of 2010during the second half of 2010
Total loans and advances to the private sector
Other loans and advances and instalment sale credit Other loans and advances and instalment sale credit and leasing finance and leasing finance recovered in the course of 2010recovered in the course of 2010
Loans and advances to the private sector by type
The repo rate has been unchanged since November 2010, and market The repo rate has been unchanged since November 2010, and market participants are expecting an increase in short-term interest rates by late 2011participants are expecting an increase in short-term interest rates by late 2011
Money-market rates
Non-residents have consistently been net sellers of RSA bonds from October 2010
Annual cumulative net purchases of bonds by non-residents
Retail bonds have grown in popularity, with people of pensionable and near pensionable age constituting the largest category of investors
Amount invested in South African retail bonds by age of investor, February 2011
The latest Budget projects the public-sector borrowing The latest Budget projects the public-sector borrowing requirement to narrow over the medium termrequirement to narrow over the medium term
Public-sector borrowing requirement*
Reasons:
- Cyclical narrowing as tax collections rise with a stronger economy
- Smaller borrowing requirement of public corporations
•A sustained increase of $10 per barrel results in
• an increase in inflation of around 0,3 percentage points in the first quarter…
• …rising to slightly more than 0,6 percentage points after four quarters
Response of consumer prices to an oil price increase of US$10 per barrel
Inflationexpectations
Pastinflation
Employ-ment
Real GDP
Importprices
Outputgap
Adminprices
Importprices
Outputgap
Consumer prices
Producerprices
Unitlabourcost
Averageremuneration
per worker
Oilprice
M3money real GDP
Exchangerate
Produc-tivity
Outputgap
GDP deflator
Inflation targetrate
Flow chart of the price formation process in the core model
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