Growth in retail sales moderated to 8,8% y/y in October from September's record high of 13,5%, indicating that consumers are beginning to feel the impact of recent interest rate hikes. The Retailers' Liaison Committee also reported weaker numbers, with growth in real or inflation-adjusted retail sales dropping further to 8,2% y/y in October from 10% in September and 11,5% in August. Nedbank's economists expect growth in retail sales to ease further off a high base as consumers begin to react to higher interest rates and rising food prices in stores.
Mining production picked up pace slightly in October when it rose by 2,5% y/y compared with a 0,4% contraction in September. But the Stats SA numbers mask large differences in performance between the gold mining sector, where output fell by 7,1% y/y in October, and nongold mining, which was up by 4,4%. Investec's Annabel Bishop says the low output has been in reaction to rising capital and operational costs, including inadequate transport infrastructure. The value of mineral sales rose by a heady 50% to R20,9bn in September, boosted by high commodity prices.
A poll of international economists suggests that SA's growth next year will be much in line with this year's. Since the poll was conducted before Stats SA revised the GDP numbers last month, the forecast of 4,2% is out of date, but their view of an unchanged growth rate suggests 4,9%-5% next year. Their 2007 outlook for a full percentage point cut in the current account deficit to 4,9% of GDP, implies stronger export growth driven, mostly, by a weaker rand. China and India are, once again, expected to perform the best among leading developing nations.
The gold price fell to its lowest level, US$614/oz, in four weeks as the US dollar strengthened. The yellow metal also declined as a drop in oil prices lowered inflation expectations, which reduced gold's appeal as a so-called safe-haven asset. The metal has bounced back and forth in recent days, reflecting thin market conditions ahead of the Christmas and New Year holidays.
Oil prices declined by more than 1% last week because of high US oil inventories and mild weather across much of the US. However, losses were limited by Opec's decision on Thursday to cut output for a second time by 500 000 b/d as well as a fresh attack on the oil industry in Nigeria. Oil also gained as dense fog delayed crude oil shipments to refineries along the US Gulf Coast.
Bullion exchange traded funds (ETFs) are flourishing and expanding, and the market liquidity problems some expected to be created by these new investment products have not materialised. ETFs have helped widen the bullion market by attracting retail investors who used to be reluctant to trade in commodities. ETFs have accumulated more than 600 t of gold and about 3 500 t of silver so far. These funds allow investors to gain exposure to commodity markets without worrying about setting up futures trading accounts or taking physical delivery. There are about 10 bullion ETFs in the US, UK, Australia, Turkey, Singapore and SA. ETFs are listed on stock exchanges and track spot prices.
Australia's commodity exports |
Australia trimmed its forecast for commodity export income in 2006/2007, as the drought there has hit exports of agricultural products. The government cut its growth forecast from commodity export earnings to 13% from 14% previously forecast in September. Total earnings from commodity exports are now forecast to be at around A$140bn. The value of mineral and energy exports, however, is forecast to be around A$111bn in 2006/2007, up 20% from the A$92bn in 2005/2006.
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