NATIONAL ECONOMY

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NATIONAL ECONOMY

• Presentation to the MPC,
• August 2004

Research Department
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NATIONALACCOUNTS
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Real gross domestic product
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Real final consumption expenditure by households
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Buoyant demand for consumer goods can be
ascribed, among other things, to

• an increase in real household disposable income
• additional tax relief and a further increase of
  the child grant in the 2003/04 Budget
• easier monetary conditions that prevailed from
  the middle of 2003
• property values that increased at near-record
  high rates, creating positive wealth effects.

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Non-agricultural employment
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Non-agricultural employment
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ACB average salary/pension paymentper recipient
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Job advertisements in print media
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Non-agricultural nominal remunerationper worker
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Recent wage settlements
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Non-agricultural labour productivity
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Non-agricultural nominal unit labour cost
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Overall inflation and CPIX
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• While CPIX inflation remained well within the
  inflation target range by June 2004, some factors
  of concern considered by the MPC included
• high and volatile international crude oil prices
• possible secondary effects of rising energy
  prices
• uncertainty concerning exchange rate
  developments
• Aggregate domestic spending over income which has
  led to widening the T/D and C/A deficit.
• some salary and wage settlements significantly in
  excess of the inflation target range

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CPIX and administered prices excluding petrol
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All-goods production prices
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BALANCE OFPAYMENTS
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Trade balance including and excluding
extraordinary items
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Trade balance including and excluding
extraordinary items (continued)
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Current account of the BoP
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Ratio of current-account balance to gross
domestic product
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Financial account
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Financial account (continued)
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Balance of payments Overall balance
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Balance of payments Overall balance
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Effective exchange rates of the rand
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• The competitive performance of the rand during
  2003 and the first half of 2004 could be
  attributed, among other factors, to
• fairly high rates of growth in money supply and
  bank loans and advances
• buoyantly rising domestic demand and positive
  wealth effects and
• increases in certain administered prices in
  excess of the inflation target range.
• rising foreign-currency prices of South Africas
  main export commodities
• Source SARB Annual Economic Report 2004

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• the continued weakness of the US dollar
• the large, although declining, positive interest
  rate differential between South Africa and its
  main trading partners
• sound monetary and fiscal policies
• the upgrading by Standard Poors and Fitch
  Ratings of South Africas foreign and local
  currency sovereign debt ratings in May 2003
• leads and lags in foreign receipts and payments
• the closing out, during May 2003, and subsequent
  further improvement in the international
  liquidity position of the Reserve Bank
• Source SARB Annual Economic Report 2004

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• the closing out of the oversold forward book of
  the Reserve Bank during February 2004
• the successful completion of the general
  elections held during April 2004
• the successful bid for the 2010 soccer world cup
  during May 2004 and
• the self-reinforcing expectations arising from a
  protracted period of appreciation
• Source SARB Annual Economic Report 2004

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Thank you