The South African Reserve Bank’s composite leading business cycle indicator released this week gives us an opportunity to look at business confidence, building plans approved, manufacturing orders and adverts for jobs, to see how positive sentiment and decisions already put in motion could play out in the next few quarters.
President Cyril Ramaphosa is trying to tread a fine line between slowing the infection rate while minimising the impact lockdown measures will have on the economy. The whiplash experienced by global financial markets in the wake of last week’s US Fed meeting has largely unwound, enabling the rand to regain some of the ground it lost in the midst of the mini-taper tantrum. But it has lost ground against its emerging market peers, coming in at third place for the year to date, with a gain of 3.2%, after being overtaken by the Brazilian real, up 3.6% year to date .
Old Mutual Multi Managers investment strategist Izak Odendaal even views the one supposedly “negative” leading indicator, namely the narrowing in the interest rate spread, as a positive. He says that in the current context, a flatter yield curve is actually good news in so far as it reflects lower long bond yields.