Today, the local data card picks up steam with the release of money supply and private sector credit, trade balance, and monthly budget balance data for March.
Recall that sector credit growth slowed to 3.7% in February, from 4.6% y/y in January. February marked the lowest year-on-year growth rate since July 2024 despite the SARB’s interest rate cut in January. February’s slow growth was driven by weaker corporate credit demand, whilst household credit demand has remained very unresponsive to lower interest rates. Overall, the credit cycle remains lacklustre as there is little demand from the private sector to take on more debt. Equally, from a supply side, bank lending standards remain tight. The SARB’s rate-cutting has not yet sparked a credit cycle surge and is unlikely to do so despite the further interest rate cuts anticipated this year. As such, March’s total credit demand will likely grow only slowly.
As for trade, South Africa’s trade balance moved back into surplus in February at R20.9bn, recovering from January’s deficit of -R16.8bn. The occasional monthly deficit aside, South Africa has seen an almost six-year-long run of trade surpluses. February’s improvement was due to the notable increase in exports (10.4% m/m), whilst imports decreased (-13.5% m/m). The return to a trade surplus in February, following January’s deficit, is a welcome outcome that will support economic growth and partially counter the government’s weak fiscal position. Record-high gold prices (which support exports), low oil prices combined with a firm ZAR (which reduces the value of SA’s key import) suggest a continuation of a strong trade surplus in March’s reading.
Finally, regarding the monthly fiscal data, SA recorded a budget surplus of R24.4bn in February, following a deficit of -R62.7bn in January. This was largely seasonal, as February typically brings a budget improvement. More broadly, from a year-to-date perspective, the budget deficit stood at -R323bn in February, putting public debt-to-GDP at roughly 75% of GDP. March’s budget print is likely to have fallen back into deficit, but March also marks the end of the fiscal year. 2024/25 should show improvement over 2023/24, bolstered by the once-off GFECRA allocation. In light of the upcoming Budget deliberations, this data is, of course, historical, but it helps underscore the urgency of expenditure reform as persistent deficits drive up debt and interest costs.
ZAR Markets
The USD-ZAR has been treading water just north of 18.5000, struggling to make a break lower while pressure on the USD eases. Yesterday, US President Trump signed orders to soften the blow from his auto tariffs, while his administration also touted a deal with a foreign trading partner. Signs of a moderation in global trade tensions support the dollar at the margin, or at least reduce depreciation pressures. Looking at today’s session, the focus will be on highly-anticipated economic data out of the US and Europe, meaning local data will be relegated to the back burner. Specifically, the market will have first-quarter GDP numbers out of the US and Eurozone to digest today, which are expected to show the Eurozone economy expanded slightly, while the US economy is expected to record slowing growth. Any deviations from these expectations could be market-moving, especially if they lead to investors rethinking the global interest rate outlook.
Global FX Markets
The U.S. dollar remained stable but was set for its weakest monthly performance since November 2022, driven by uncertainty from President Trump’s erratic trade policies, particularly his sweeping tariffs announced in April. These tariffs caused a global stock market slump and led investors to shift away from the dollar and U.S. Treasury debt, strengthening currencies like the euro, yen, and Swiss franc. Trump softened some auto tariffs with credits and relief measures, and his administration claimed progress in tariff negotiations with countries like India and South Korea. However, concerns persist about economic fallout, with tariffs expected to slow growth, increase inflation, and raise unemployment. The euro rose 5.26% in April, the Swiss franc gained over 7%, and the yen increased by more than 5%. Economic indicators showed a declining U.S. economy, with low consumer confidence, a record trade deficit, and job cuts by companies like UPS and General Motors. Economists predict the Federal Reserve may delay rate cuts until labour market weakness emerges fully in the data