The current account deficit on the balance of payments widened to a record R163bn - equal to 8,1% of GDP - in the third quarter. This is up from 6,5% and 6,9% in the second and first quarters respectively. The deficit was the result of a flat export performance and a sharp rise in imports, particularly oil. But the high foreign ownership of SA equities and bonds also contributed as the services deficit (net service and income payments to non residents, together with net current transfers) widened to R111bn in the third quarter from R93bn in the second.
Wage settlements and inflation |
Higher wage settlement rates are starting to fuel inflation. Nominal remuneration per worker increased from 4,9% in the first quarter to 7,5% in the second, according to data in the Reserve Bank's Quarterly Bulletin. The wage settlements ranged between 4,8% and 8% for gold mines to 13% in the electricity sector. Higher wage rises together with lower productivity levels caused the nominal unit labour cost increase to escalate from 2,1% in the first quarter to 7,5% in the second. The higher labour unit costs pose a significantinflation risk.
Leonie Theunissen
Chicago Board of Trade corn (maize) futures rallied to a six-month high last week on a variety of bullish factors, including strong rallies in crude oil and equities. News that Goldman Sachs raised its forecast for corn prices in 2008 to US$5,30 from $4,40/bushel also gave corn futures a boost. Brisk demand for corn from the livestock, ethanol and export sectors continues to underpin corn prices. News that China keeps trying to sell state-owned grain reserves into its domestic market to help tame food-led inflation is another bullish factor for prices.
Gold recaptured levels above US$800/oz during the course of last week but, by the end of the week, bullion had lost its gains, hurt by a US dollar rally. The greenback strengthened after a report showed signs of lower US consumer inflation, which slashed expectations of more aggressive interest rate cuts from the Federal Reserve. Even though rising consumer and wholesale prices should boost gold's appeal as a hedge against inflation, bullion's near-term direction could hinge mainly on the strength of the dollar. JP Morgan was bullish on gold in the long run, forecasting further safe-haven buying of the metal. It increased its gold price forecast for next year to $814/oz from $716/oz and for 2009 to $767/oz from $698/oz.
Oil prices jumped last week, with tight global supplies and strong economic growth in developing nations, particularly China, lending support. A US Energy Information Administration report showed that US crude oil inventories fell for the fourth time in a row, hitting their lowest level since early March 2005. Opec, whose members account for half of global oil output, and the International Energy Agency, adviser to 27 industrial countries, present sharply diverging views on the prospects for world oil demand next year. On a bullish note, investment bank Goldman Sachs forecast that US crude would average US$95/bbl in 2008, up $10 from the previous projection, and could hit $105/bbl by the end of 2008.
SA gold output fell 5,8% y/y in volume terms in October, while overall minerals production dropped 3,4% and that of non gold minerals fell by 3,1%, according to latest Stats SA figures. On a seasonally adjusted and quarterly basis, total mining production increased by 0,6% in October, due to a 0,8% rise in the output of non gold minerals. This was mainly the result of a 1,5 percentage point increase in diamond production. Gold sales fell 27,1% y/y to R3,1 bn in September, while sales of non gold minerals increased by 3% to R16,83bn and total mineral sales fell 3,2% to R19,93bn. On a seasonally adjusted basis, the value of mineral sales for the three months ended September 2007 fell 9,7% q/q.
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