South Africa recorded a deficit of R7,005-billion for its trade with non-Southern African Customs Union trading partners in May after a deficit of R2,418-billion in April, according to Customs and Excise figures released on Friday.
The foreign trade balance was expected to have narrowed to a R2-billion deficit, a survey of economists by I-Net Bridge found. Forecasts ranged from a R1,3-billion deficit to a R3,5-billion deficit.
Commented Mike Schussler, economist at T-Sec: “I can’t believe it — but the explanation for part of it is the imports of oil. This is not good for the rand and neither for bonds. I was expecting a deficit of less than R2-billion. And maybe some of the vehicle dealers have imported vehicles now because of the weaker rand — in other words they have been buying ahead. But in spite of these explanations, the trade figure is still a shock.”
George Glynos, economist at ETM, said: “The figure is disappointing and the current account is very much under pressure with a trade deficit like this. The current account has been the reason that the rand weakened and now we really can’t be too optimistic about the currency.
“The trade data is not usually that significant for the markets as it’s historic — but this time the markets will be taking it seriously. Even though the oil imports have skewered the figure, it is still disappointing.
According to Magan Mistry, Nedbank economist, the May trade figure shows that the current account remains in a significant deficit during the second quarter of 2006. “Coupled with the higher than expected producer price inflation and money supply figures, the risk is for further interest rate increases,” Mistry said.
Steve Meintjes, analyst at Imara SP Reid, commented: “This echoes the quarterly balance of payment figures where a deficit of 6,4% of gross domestic product was reflected. It’s too early to expect the weaker rand to have boosted exports and curb imports.
“My gut feel is the rand weakness could be reflected in three months. We’ve had a weaker rand for a month and it should still give a boost to manufacturing exports down the line — it takes time for exporters to get on the phone when things change as they have.” — I-Net Bridge