Positive Current Account Surplus Lights Up The Market

12 March 2021 – Data from the SA Reserve Bank (SARB) showed that the current account surplus narrowed to a still sizeable surplus of R197.8 billion in the fourth quarter of 2020, from a downwardly revised R294.4bn in the third quarter.

SARB said terms of trade, including gold, improved further during the period as the rand price of exports of goods and services increased more than that of imports. Expressed as a percentage of gross domestic product (GDP), the current account surplus narrowed to 3.7 percent in the fourth quarter from 5.9 percent previously.

On an annual basis, the ratio switched to a surplus of 2.2 percent in 2020 from a deficit of 3 percent in 2019. This was the second largest surplus ever recorded, mainly driven by a sizeable trade surplus, driving the country into its first annual surplus in two decades. The JSE All Share Index also rallied to more than 68 700 index points, in spite of the manufacturing output declining more than expected in January.

Investec economist Lara Hodes said the current account surplus narrowed on a smaller trade surplus and larger deficit on the income account.

“Specifically, the trade surplus widened as import growth receded in the recessionary domestic economic environment while export growth increased in line with the recovery in global demand and commodity prices during he second half of 2020,” Hodes said.

Meanwhile, the manufacturing industry continued its descent into contractionary territory as output fell more than expected in January 2021.

Data from Statistics South Africa (StatsSA) yesterday showed that manufacturing production fell 3.4 percent in January compared to the year earlier, dragged petroleum, chemical products, rubber and plastic products, worse than market expectations of a 1 percent following an upwardly revised increase of 1.9 percent in December 2020.

StatsSA’s director of industry statistics Nicolai Claassen said food and beverages was the second biggest contributor to overall output, decreasing by 4.9 percent. He said said production of beverages alone fell by 26.2 percent year-on-year in January.

“On the upside, the biggest positive contributor to manufacturing output in January was the automotive division, increasing production by 28.1percent year-on-year,” Claassen said.

FNB economist Thanda Sithole said the persistent electricity supply disruptions posed a risk to economic activity.

However, he said the increased manufacturing purchasers managers index in February will be positive for the first quarter of 2021 GDP growth outcomes.

“The anticipated global economic recovery should support the manufacturing sector through manufacturing exports, though the rising input costs of oil and other raw materials could limit production volumes,” Sithole said. Source (Business Report)