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The Citizen
3 days ago
- Business
- The Citizen
Weekly economic wrap: Bad news for oil prices, rand soldiers on
While the week was uneventful on the local economic front, the same cannot be said for the international picture for oil prices. As expected, the week brought bad news for oil, but thankfully not such bad news for the rand as Israel and Iran entered a full-blown war after Israel struck Iran's nuclear facilities last week. Closer to home, inflation remained the same in May, while retail sales showed a solid performance in April. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), points out that so far none of the global superpowers has directly become involved in the Israel-Iran war, with US president Donald Trump saying that he will decide in the next two weeks what to do, although he already approved attack plans. 'In commodity markets, there is good news with a higher platinum price and bad news with a higher oil price for South Africa's trade dynamics. The platinum price jumped to a more than 10-year high this week, supported by demand from China, sustained investor interest and concerns about a deficit in the market, with demand outstripping supply. 'On a negative note, the oil price surged higher this week and is currently almost 20% above the price at the start of the month. Iran directly supplies about 3 million barrels of oil to the market per day, and this could technically easily be made up by a country like Saudi Arabia, which is still voluntarily cutting back production. 'However, the real concern is that freight in the Strait of Hormuz, which channels about 15% of the world's oil and 20% of liquid natural gas, is disrupted. Oil continues to flow, but prices to charter large oil tankers sailing through the strait have already more than doubled from last week.' ALSO READ: What Israel–Iran conflict means for South African economy Oil prices surge as Israel-Iran war heats up Bianca Botes, director at Citadel Global, agrees that the recent outbreak of war between Israel and Iran has significantly unsettled global energy markets, with profound implications for oil prices, the global economy, and Middle Eastern power dynamics. 'This escalation triggered immediate volatility in oil markets, with Brent Crude and West Texas Intermediate (WTI) prices surging by over 4% from the start of the conflict, seeing Brent reaching around $76/barrel and WTI surpassing $75/barrel. Since the start of the conflict, oil futures have risen approximately 10%, reflecting market anxiety over potential supply disruptions. 'Iran is OPECʼs third-largest oil producer, extracting about three million barrels per day. Despite sanctions limiting its exports, Iran remains a significant player, especially in supplying China and India. The conflict threatens Iranian oil production and shipping routes, notably the Strait of Hormuz.' Botes points out that analysts warn that oil prices could spike to $100 per barrel or even $120 per barrel if supply through the Strait of Hormuz is disrupted. 'Such a price shock would reverberate through global markets, impacting inflation, consumer costs, and economic growth worldwide. 'Brent Crude Oil futures fell below $73/barrel, but are still set for a third consecutive weekly gain. Fears of supply disruptions due to the ongoing conflict supported prices, even as Iran continues to export crude at high levels. A sharp drop in US crude inventories earlier in the week also helped keep oil prices elevated.' She says gold prices dropped below $3 360/ounce, nearing a one-week low and heading for their first weekly decline in three weeks. 'Investors have been selling gold to cover losses in other markets, and the prospect of no or gradual interest rate cuts limited gold's appeal.' ALSO READ: Israel vs Iran: Why you may soon have to pay more for petrol in South Africa The rand soldiers on De Schepper says the rand exchange rate held up well during the week, but depreciated slightly against a stronger dollar on Thursday and closed the week weaker against the dollar, euro, and pound. Botes notes that the rand is bouncing between R17.90/$ and R18.10/$, showing a slight weakening trend since its recent rally. 'The rand's performance was largely influenced by global risk sentiment and fluctuations in commodity prices. 'Compared to other emerging market currencies, the rand has held up well in recent sessions, despite ongoing uncertainty in global markets and the impact of international developments on investor appetite for risk assets.' Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, point out that the rand broke through R18/$, dropping to its lowest level since the second week of May as global risk aversion spiked and investors dumped emerging market assets. 'The local currency touched R18.15/$ on Thursday evening before recovering to around R18.01 this morning, down 1.2% from R17.80 on Monday.' The rand was trading at R17.99/$ this afternoon. ALSO READ: Inflation unchanged in May at 2.8% as economists expected Inflation remains at 2.8% in May According to the latest release from Statistics SA, inflation stayed below 3% in May at 2.8%, the same as in April. The largest contributions came from food and non-alcoholic beverages, which increased by 4.8%, primarily driven by higher meat prices. Katrien Smuts, economist at the BER, says while the recent foot and mouth disease outbreak put pressure on red meat prices, it was not the sole driver. 'Prices were already trending upward for several months and some analysts suggest the impact may be short-lived. Outbreaks often lead to export bans, which can increase local supply and place downward pressure on domestic prices. 'The ban on poultry imports from Brazil, due to an avian influenza outbreak, is expected to be temporary and limited to affected areas. While Brazil is a key poultry supplier to SA, the impact is also only expected to be short-lived.' Nkonki and Matshego say inflation remaining steady at 2.8% in May was in line with market expectations but higher than their 2.3% forecast. 'The primary contributor was food prices, although increases in housing, utilities and alcoholic beverages also played significant roles. Despite ongoing downward pressure from fuel prices, persistent price increases in other sectors shaped the overall inflation landscape.' Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, note that fuel prices dropped sharply, but warn that risks from a weaker rand and rising global oil prices could reverse this trend. 'Despite current disinflation, geopolitical tensions and trade uncertainty ahead of the July Monetary Policy Committee (MPC) meeting suggest that the South African Reserve Bank (Sarb) will likely maintain a cautious stance and hold rates.' ALSO READ: China's clever trade deal with Africa – removal of tariffs on most goods Increase in retail sales in April, but motor trade decreases Statistics SA's latest retail trade sales data showed another solid performance in April, with sales increasing by 0.9% compared to March and 5.1% compared to a year ago. The main driver of growth was the general dealers' category, which increased by 5.3%. Despite another steep annual decline of 6.5%, wholesale trade sales perked up by 0.9% compared to March. However, motor trade sales decreased by 1% compared to March and by 0.9% compared to a year ago. Smuts says while the muted inflation print provides some welcome relief and April retail sales showed the consumer has some strength, the question is how long this can be sustained. 'Real incomes are squeezed amid unchanged personal income tax brackets, a pending electricity tariff hike in July and an increase in the fuel levy.' Nkonki and Matshego expect the upward momentum in retail sales to continue, supported by rising real incomes, subdued inflation, continued withdrawals of contractual savings and lower debt servicing costs compared to a year ago. Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano point out that despite April's strong performance, retail activity over the past three months remains 0.5% lower compared to the preceding three-month period, suggesting that household spending may be losing momentum. 'The spike in annual sales likely reflects holiday-related spending and two-pot pension withdrawals coinciding with the new tax season.'
IOL News
4 days ago
- Business
- IOL News
Absa Manufacturing Survey reveals decline in business confidence amid economic challenges
The Q2 2025 Absa Manufacturing Survey indicated that the Business confidence declined marginally to 33 points, down from 34 in Q1, an outcome some noted could have been significantly worse given prevailing conditions. Manufacturing business confidence dipped in the second quarter amid domestic and global uncertainty. This was revealed in the second quarter 2025 Absa Manufacturing Survey. Business confidence declined marginally to 33 points, down from 34 in quarter one, an outcome some noted could have been significantly worse given prevailing conditions. The manufacturing survey was conducted by the Bureau for Economic Research (BER) drawing insights from approximately 700 manufacturing businesses. Economists have echoed similar sentiments The confidence index ranges from 0 (no confidence) to 100 (extreme confidence). Absa said domestically, manufacturers also faced several challenges. These included subdued product demand, rising electricity tariffs and water supply disruptions – particularly in Gauteng, compounding to the sector's strain. Sachin Chanderdhev, a sector specialist for the Manufacturing Sector at Absa Business Banking said during the survey period, gross domestic product (GDP) forecast downgrades, the evolving Budget 2.0/3.0 and political tension within the Government of National Unity contributed to heightened local uncertainty. 'Internationally, geopolitical concerns also persisted, notwithstanding the high-profile White House engagement between South Africa and the United States,' Chanderdhev said. Domestic and export sales deteriorated sharply, falling by 22 and 32 points, respectively. Similarly, new domestic and export orders dropped by 25 and 35 points, indicating sustained demand-side pressure amid constrained consumer purchasing power. Survey indicators - tracking sectoral constraints including insufficient demand, political uncertainty and skilled labour shortages - also worsened during the period. Transport, capital and chemicals subsectors were the main contributors to the overall drop in sentiment. Notably, confidence in the Transport subsector declined steeply to 3 points, down from 27 in quarter one, which Chanderdhev suggested may reflect concern around US tariff increases and uncertainty regarding the continuity of multinational production operations in South Africa. Conversely, the furniture and metals & glass subsectors recorded confidence gains of 16 and 9 points, respectively. The latest indicators follow a two-point decline in quarter one, indicating that the manufacturing sector remained under pressure in the first half of 2025 as demand remains constrained. Gross value added by the South African manufacturing sector declined by -2% quarter-on-quarter in the first quarter, following a 1.1% contraction in quarter four. Waldo Krugell, an economics professor at North-West University, said the survey shows some really worrying numbers indicating weak demand and local and international uncertainty. 'My worry is that this again means low investment and no economic growth. The recent GDP numbers showed that if investment in machinery and equipment is excluded, private investment is now 30% lower than before the Covid pandemic," said Krugell. "There is not much that South Africa can do about real wars and trade wars elsewhere, but it is clear that we need more certainty and a lot more speed with the reforms that are underway in SA.' He said a drop of confidence in the transport sector is telling of too slow progress being made at Transnet. North West University Business School economist Professor Raymond Parsons said the Absa survey again confirms that South Africa's economic recovery is slow and uneven. 'Whilst the manufacturing sector outlook remains uncertain, retail sales in April, on the other hand, were strong. The Absa survey is a further reflection of the extent to which global and domestic uncertainty is still hampering SA's incipient economic recovery in a key business sector, Parsons said. "It emphasises why the hesitant economic upturn needs maximum policy support.' Efficient group chief economist Dawie Roodt said, 'It is clear the confidence in the broader economy is not what it is supposed to be. When we talk about manufacturing what has been happening in South Africa for many decades is we are having deindustrialisation, which means we are closing down factories.' Professor Bonke Dumisa, an independent economic analyst, said unfortunately the manufacturing sector has been negatively affected globally. 'There are significant global market jitters because of the US tariff wars. It is against this background that manufacturing, mining, and other sectors have been so negatively affected.' BUSINESS REPORT
IOL News
5 days ago
- Business
- IOL News
Construction industry sees green shoots of growth off a low base - BER's Lemboe
South Africa's construction sector, long mired in stagnation and underperformance, is beginning to show green shoots of recovery off a low base, South Africa's construction sector, long mired in stagnation and underperformance, is beginning to show green shoots of recovery off a low base, according to Craig Lemboe, the deputy director at the Bureau for economic Research (BER) speaking at Construction Industry Business Breakfast held on Wednesday. While the industry remains well below pre-pandemic output levels and continues to suffer from weak capital investment and low business confidence, recent survey data suggests that "green shoots" may be taking root. Lemboe said for most of last year, saw the non residential sector was starting to show a little bit more growth and more potential than the residential sector. However, this was from a more eroded base as it's 50% smaller than what than what it was 10 years ago. "We also see from our civil contractors survey that activity, particularly among large contractors, is doing quite well. So there is this idea that we are starting to see some larger infrastructure projects to come on board, and that the contractors are starting to see this, both in terms of the current activity, but also in terms of the activity going forward," he said. South Africa was starting to see some larger infrastructure projects to come on board. Despite these promising indicators, Lemboe cautioned that systemic barriers persist. Long delays in municipal approvals, chronic late payments by public entities, and uncertainty around infrastructure funding continue to hamper sustained recovery. The Western Cape province stood out as a bright spot, with above-average construction activity and stronger investor sentiment. Still, nationally, overall building sector confidence remains low, with 75% of residential builders expressing dissatisfaction with prevailing conditions. Another positive to support growth ahead, was the Budget 3.0 announcement of R1.03 billion allocated for infrastructure. However, Lemboe said while it "is a welcome announcement, there are a number of caveats that we are very weary of at the BER." A large chunk of this spend is being filtered through state-owned enterprises, but there isn't a lot of clarity on where the income is going to come from, where the capital is going to come from, in order to find these projects. Also a portion of the funds comes through provinces and municipalities, and municipalities are known to be weak on capital expenditure. Ramokgopa Meanwhile, Minister in the Presidency for Planning, Monitoring and Evaluation, Maropene Ramokgopa, also speaking at the event, said South Africa is accelerating plans to transform the country into a "construction site" through a sweeping infrastructure drive that aims to tackle unemployment, stimulate inclusive growth, and reduce the high cost of living, . Ramokgopa pointed to the government's Medium-Term Development Plan (MTDP) for 2024–2029, which commits to deliver n the established investment pipeline. "Increasing public infrastructure spending requires stimulating private sector investment that will enable industrialisation and supporting job creating in the country," she said. The government has committed over R943.8 billion to public infrastructure over the medium term, with a strong emphasis on crowding in private investment through public-private partnerships. However, public infrastructure spending currently accounts for just 3.8% of GDP, well below the 10% target set. Ramokgopa said South Africa's national development was linked to that of the African continent. "Infrastructure must drive regional integration, promote and support industrialisation across Africa as a region. We are advancing collaboration and partnership in accelerating regional infrastructure projects through an African Union's presidential infrastructure champion initiative," she said BUSINESS REPORT
The Citizen
13-06-2025
- Business
- The Citizen
Weekly economic wrap: Dramatic jumps for gold and oil
Missiles and drones raining on Iran from Israel had an immediate effect on the global and local economy, with the prices of oil and gold increasing. Bad news about the South African economy was overshadowed by the end of the week with Israel's attack on Iran that immediately sent the prices of gold and Brent Crude Oil rocketing as investors invested in the safe haven of gold and fears escalated of disruption in oil supply. Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER), says the economic story for the week was initially relatively positive, with the overarching narrative that the US and China agreed on a trade truce. 'However, overnight, Israel struck Iran's nuclear facilities and military sites and killed senior commanders in dozens of strikes. While Israel attacked Iran before, this is the first time nuclear facilities were purposefully targeted, with those being 'at the heart' of the operation, according to Israeli Prime Minister Benjamin Netanyahu.' She points out that the oil price spiked by more than 4% to a two-month high amid concerns of renewed unrest in the Middle East mid-week, but came off those highs when a risk-off mood returned in global markets. 'This morning, Brent Crude futures jumped by 12% to about $78/barrel. Currency markets settled following an initial knee-jerk reaction after the news of the attack broke. The extent of the retaliation will determine much of the market and global reaction. The US was quick to state it was not involved and warned Iran not to target the US.' ALSO READ: Economic activity picked up for the first time in 8 months in May Dramatic jump for oil and a substantial rally for gold Bianca Botes, director at Citadel Global, also noted that the price of Brent Crude Oil, the global benchmark for petroleum prices, jumped dramatically to approximately $76 per barrel this morning, its strongest level since February. 'This sharp increase occurred after Israel's surprise military attack on Iran overnight, which created serious concerns about potential oil supply interruptions across the global market. The situation escalated when Israel announced a state of emergency, indicating that Iranian retaliation against Israeli locations could happen soon.' She says this development raised fears about a wider regional war that could affect the Strait of Hormuz, a critical waterway that handles roughly one-fifth of the world's oil transport. Botes points out that gold prices experienced a substantial rally, climbing over 1% to surpass $3,440/ounce in the early hours of this morning, nearing all-time highs as investors seek safe haven assets. 'The precious metal's surge directly followed Israel's military action against Iran, with Israeli Prime Minister Benjamin Netanyahu confirming that the strikes targeted Iran's nuclear facilities while acknowledging Iran's continued ability to respond. 'Beyond the Middle Eastern conflict, gold received additional support from uncertainty surrounding American trade policies. President Trump's threats to implement unilateral tariffs on trading partners created further market anxiety, although US Treasury Secretary Scott Bessent suggested the current 90-day tariff suspension might be extended.' ALSO READ: Structural reform is silver bullet needed for SA economy to grow – OECD Oil price highest since April, gold jumps 3.2% for the week Busisiwe Nkonki and Isaac Matshego, economists at the Nedbank Group Economic Unit, note that Brent Crude Oil is hovering around $72.43 a barrel this morning, its highest level since 3 April, up by 5% since Friday last week. 'Oil prices were already under increasing pressure early in the week on reports that the US-Iran nuclear talks had deadlocked. 'Gold has jumped by 3.2% for the week to $3 418 this morning, while platinum is down by 1.7% overnight after strong investor demand briefly propelled it through $1 300 an ounce on Thursday.' ALSO READ: R26 billion rescue from World Bank: Can the loan save Eskom and Transnet? Rand folds under the pressure of possible war in the Middle East Botes says the rand experienced significant pressure during trade on Thursday and early this morning, coming off its recent highs and resuming a sideways trend. 'The weakness in the rand is largely driven by the rebound in the dollar, while increased geopolitical tension and renewed trade tensions drove flight to safe-haven assets.' Nkonki and Matshego, say the rand dropped sharply overnight, breaking through R18/$ as global risk aversion jumped after Israel bombed Iranian nuclear sites. 'The assault added to the tensions that simmered early in the week after the US and Iran failed to reach an agreement on Iran's nuclear programme with the 60-day deadline stipulated by US President Donald Trump. 'The rand is trading around R17.96/$ this morning, its weakest level since 30 May. It touched R17.69/$ on Tuesday, its highest level since the second week of December, buoyed by investor demand for higher-yielding assets.' The rand was trading at R17.91/$ on Friday afternoon. ALSO READ: Manufacturing output falls sharply and unexpectedly in March Manufacturing production worse than consensus forecast According to Statistics SA, manufacturing production decreased by 6.3% in April, after a downwardly revised 1.2% decrease in March. Nomvelo Moima, economist at the BER, says the headline figure came in worse than the consensus forecast, which anticipated a 4.5% decline in output. Weakness was reported across the board, with nine out of the ten main subsectors contracting. The biggest drags on annual output came from food and beverages (-7.6%), metals and machinery (-6.3%) and motor vehicle parts and accessories (-13%). However, she says, on the positive side, seasonally adjusted manufacturing production increased by a better-than-expected 1.9%, up from a 2.5% decline in March. 'April marked the sixth consecutive annual decline in manufacturing output, consistent with the Absa PMI, which remained in contractionary territory over the same period. 'Therefore, a further decline in May's PMI suggests we could see another month of lacklustre activity in the manufacturing sector.' ALSO READ: Manufacturing experts urge SA to turn more raw materials into products Better start to the year for manufacturing production despite decline Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say despite the decline, it is nonetheless a moderately better start to the second quarter of 2025, although the persistent annual decline underscores ongoing unfavourable operating conditions and is consistent with their assessment of downside risks to the near-term economic growth outlook. Nkonki and Matshego say the contraction in manufacturing production steepened in April, with output falling by 6.3% from -1.2% in March. 'The sharper drop in output was driven by the increase in public holidays this year compared to 2024. Nonetheless, the sector continues to struggle due to inefficiencies in the logistics network and subdued domestic and global demand. 'These circumstances have led to ample spare capacity, high operating costs and weak commodity prices.' ALSO READ: SA's shrinking mining sector and the policies that brought us here Bigger than expected contraction in mining production Mining activity also revealed a downside surprise compared to the consensus expectation of a -4% decrease. According to Statistics SA, annual mining output plunged by 7.8% in April, down from an upwardly revised 2.5% contraction in March. The biggest drag came from a fall in the production of platinum group metals (-24%) followed by gold (-2.5%) and coal (-1.7%) which both shaved off -0.3% percentage points from the annual figure, while iron ore made the largest positive contribution to output (+5.3%). Moima says on a positive note for quarterly gross domestic product (GDP) dynamics, mining production ticked up by 0.6% month-on-month, after a 3.6% increase in March. Nkonki and Matshego point out that the contraction in mining continued for a sixth consecutive month in April, registering a sharper decline of 7.7% from -2.8% in March. 'More public holidays in April this year, combined with the struggles on the logistics front and subdued commodity prices, contributed to the weakness.' Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say the contraction in mining production marks the sixth consecutive month of annual decline. 'The outcome was worse than the Bloomberg consensus forecast of a 4.0% decline and largely reflected the disruptive impact of breakdowns and third-party supply issues affecting platinum group metals.
Irish Independent
06-06-2025
- Business
- Irish Independent
Fix it up: Historic Horace Plunkett home in Dublin's Foxrock is hungry for a big revamp
Depending on how you look at it, the house at 4 Kilteragh Pines in Westminister Road, Foxrock, D18 is either a three-storey house or a sort of huge, multi-level 'apartment'. Either which way, it is one-sixth (or thereabouts) of the historic home of Sir Horace Plunkett, the founder of the agricultural cooperative movement and a subject of every Irish school history book. Tell me more... Kilteragh Pines was attacked and burned during the War of Independence and rebuilt in 1923, when presumably it was refashioned in its current 'international modern' style and divided into six residences. Number 4 got the original grand entrance and comes with six bedrooms, four bathrooms, a hallway, drawing room, dining room, kitchen, pantry and study area, as well as a substantial roof terrace and courtyard. The bad news? These days, it's quite tired and run-down and by the looks of things has not been decorated since the 1980s or thereabouts. By the looks of the fuse box, this will definitely need a rewire and most likely, replumbing. It will need a kitchen fit-out and complete redecoration, and possibly a new heating system. Any other issues will be subject to a proper survey being carried out. There is an annual service charge of €2,200 per annum. And the good news? The service charge includes the maintenance of a substantial and very well-kept communal garden, entrance and driveway. The house itself is large, at not much short of 3,000 sq ft, and is BER exempt. There is a separate lock-up garage and it comes with its own private lawned garden in addition to the communal space. Its orientation and generous fenestration make it a bright prospect inside. How much to buy it? Offers in the region of €1.275m. And to fix it up? If you've got pockets deep enough to bid, you've more than likely got access to the minimum of €200,000 (and up to €500,000) more required to bring this historical pad into the 21st century. What will I end up with? A six-bedroom home in the affluent suburb of Foxrock with both private and communal gardens. You're also buying into some serious cultural capital too, not only with the architectural style, but also through the Plunkett history. This time machine also has connections to HG Wells and George Bernard Shaw, both of whom are said to have been visitors to Plunkett's home when he lived there. Who should I talk to? You can co-op Paul Aherne of DNG Stillorgan (01 283 2700) to show you around No4's very generous facilities.
