July was a rough month for Global & Local as several of our staff members tested positive for COVID. We are happy to report that all have recovered, and life is back to normal at the office. We appreciate your patience with us during this time.
July saw a watershed moment for our government with widespread looting in Kwa-Zulu Natal and Gauteng, all under the guise of support for Jacob Zuma following his incarceration. The looting lasted for a week and eventually 25 000 army soldiers were deployed, but not before several malls, businesses and factories were completely ransacked. These businesses are expected to take years to rebuild, and economist are estimating that the cost to the national economy destruction is well in excess of R50 billion!
The South African Reserve Bank Monetary Committee has decided to keep the repo rate unchanged at 3.50% and prime rate therefore also remains at 7%.
This unfortunately countered by steep petrol prices hikes that has kicked in in August.
South Africa had another month of record trade, supported by the strong demand for commodities at the moment. While very welcome – the tax revenue will even assist to pay for the damages – this cannot last forever and is not a long-term solution to our economic woes.
Katherine Tai, the US trade chief plans to have a meeting with the African ministers before the end of the year to strengthen the partnerships between them and discuss a law that will provide a duty-free access to the US for goods from sub-Saharan nations.
The US economy is slowly progressing but not yet fully recovered. The central bank advised that risks to the economic view remains the same and will monitor the economic progress. With a goal of returning to full employment and keeping inflation above 2% over the longer period it was no surprise that Federal Reserve Bank decided to hold interest rates.
The US economy grew at a disappointing rate in the second quarter as GDP accelerated at 6.5% during the April to June period. That was slightly better than the 6.3% gain in the first quarter. While that would have been strong prior to the pandemic, the gain is considerably less than the 8.40% Dow Jones estimate.
The eurozone economy grew by 2% in the second quarter of the year, officially taking the region out of recession. However, it remains 3% down from its pre-pandemic level in late 2019. The growth is thanks to a 3.40% bounce in the services sector as pubs and non-essential retailers welcomed customers back.
The UK markets saw a mediocre month despite encouraging earnings numbers and enormous dividends declared by some of the larger corporates. While this will drive sentiment in the right direction, it seems there is still a lot to be done.
European stocks have been a mixed bag, as fears return over more COVID restrictions following a breakout of the Delta variant. Even so, some normality resumed as the European Championship final was hosted in London with over 60 000 people in attendance.
The Euro Stoxx 50 has held up well despite slower economic growth and revised ECB inflation targets.
The Rand saw massive moves during the month due to the social unrest, reaching a high of R15 to the USD at its peak . It has since recovered slightly again, but the unrest did nothing for the risk sentiment of the Rand. It closed the month up 1.82% at R14.56 to the Dollar.