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The SA Daily 26 March 2019

SA leading indicator still trending down

Shireen Darmalingam

  • The SARB’s January leading indicator is due out today; it slipped 0.6% y/y in December, to 105.2 pts, from an upwardly revised 105.7 pts (previously 105.5 pts) in November. The coincident indicator, which measures current economic conditions, remained unchanged at 104.2 pts in December. We monitor the leading indicator, as it tends to shift direction in advance of the business cycle.
  • Bloomberg consensus is for slippage to 104.8 pts in January.
  • Four of the nine components declined in December: the biggest negative contributions came from the number of residential building plans passed as well as export prices. Big positive contributions came from the acceleration in job advertisements as well as the number of new passenger cars sold.
  • SA’s leading indicator has averaged 99.1 pts since 2000 (it has been 90.4 pts for SA’s main trading partners in this time despite positive y/y growth since 2012.
  • SA’s leading indicator, while still comfortably above 100 pts, started trending down in 2018.
  • The pervasive risks, here and in the global economy, could keep these indices under pressure. There’s the SA national election in May, as well as the risk this week of a Moody’s downgrade (which we still don’t factor in). Still, the SARB will surely be concerned about the leading indicator’s downward trend. This week, we also expect the SARB to keep the repo rate unchanged at 6.75%.

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