South African bonds ended the week marginally weaker than last week, with the yield on the R153 rising by four basis points to 8,22% and the yield on the R157 rising by one basis point to 7,83%, with concerns around interest rate increases and selling by foreigners weighing on the market.

South Africa’s exchange, the JSE, reported on Friday that it anticipated its consolidated earnings and headline earnings per share for the year ended December 31 2006, to be "marginally higher than the previous reporting period". The JSE highlighted that the earnings for the period had been impacted by a number of events, notably robust world equities market performance.

Total South African vehicle sales surpassed the 700 000 level for the first time in history during the past year, clocking up a tally of 714 340 including non-reports, but analysts point out that interest rate increases are starting to put a brake on passenger sales.

In reporting a dip in both December to 13,5% (14%) and overall in 2006 to 15,2% (22,7% in 2005) Absa’s senior economist, Jacques du Toit, said that growth in 2007 could be expected to continue the downward trend to 9% before improving again in 2008.

Pockets of profit-taking put a lid on the JSE’s record run in the last trading day of 2006, but the outlook for the new-year remains in line with the recent bullish trend. The JSE closed at noon on Friday ahead of the new-year’s long weekend, the same time as the other local underlying financial markets.

On the back of worse-than-expected trade data, the latest M3 and PSCE figures are another tick in the February interest rate hike column, say analysts. "These data have acted as counter-weights to the better-than-expected inflation data released earlier in December," say independent economic analysts RLJP.

The new year promises to be a volatile one politically in the lead-up to the election of the new African National Congress leader in December 2007, and this uncertainty is expected to have repercussions in the economy during the course of the year, particularly as to how foreigners react.

South African Reserve Bank Governor Tito Mboweni said on Friday evening that while CPIX inflation is expected to hit the upper end of the 3% to 6% target band by the first quarter of next year, it should peak around April and then begin to come down. "We should only begin to see a breaching of the upper end in April," he said.

South African Reserve Bank Governor Tito Mboweni’s words in mid-November that South Africans need to tighten their belts came home to roost on Thursday when he put a dampener on the Christmas spirit by raising the repo rate by 50 basis points to 9%. In mid-November he sent a strong message that this rise was coming. On Thursday he followed through with this.

South African real retail sales growth in September rose considerably to 13,6% year-on-year (y/y) from August’s 8,8%, with consumers possibly buying strongly in anticipation of tighter conditions which beckoned. Total retail trade sales amounted to R35,8-billion, while real growth for the year to date — recorded by Stats SA — came in at 9,9%.