Trade wars turn up the heat on local consumers
By Sunita Menon - Jul 11th 2018, 09:24
South African consumers face more pain from potential global trade wars and fuel increases, global payments company Mastercard said in a statement.
The retail sector has been flailing in recent months, with consumers feeling the strain of VAT increases and three consecutive months of fuel price increases.
Consumer spending accounts for more than 60% of GDP. The economy is still reeling from a weak first quarter in which the sector contributed significantly to the decline.
"It’s brutal. The ongoing fuel price hikes is the number one risk to global growth, but the global trade wars are SA’s biggest macroeconomic concern. Consumers need to watch this closely," said Mastercard senior vice-president of market insights, Sarah Quinlan.
SA imports most of its petroleum products from abroad at prevailing global prices and exchange rates.
"If consumers spend more on transport, they will have less to spend on any discretionary items," said Old Mutual Multi-Managers chief investment strategist Dave Mohr.
As tensions rise between major trading partners China and the US, with ripple effects globally, the cost of living is expected to go up significantly.
"We know that we have some challenges in global trade that have been introduced into the global economy. Unfortunately for the South African market, which is heavily export-dependent, this will take a serious knock," Quinlan said.
Added to this, while China was once more open to importing SA goods, the country is now focusing on its domestic market.
"China has made a conscious decision to domestically focus their economic growth, so SA really needs to focus on diversification and stop relying on imports," said Quinlan.
This was made clear by SA’s current account deficit, which widened in the first quarter as exports fell dramatically.
"The sharp fall in exports shows that SA truly has a structural problem," said Citibank economist Gina Schoeman.
Business confidence also plummeted to levels last seen nine months ago on the back of a weaker rand and slower retail sales. The risk of a global trade war had alerted certain industries in SA, who had indicated it would affect industry and employment negatively, according to the South African Chamber of Commerce and Industry’s business confidence index.
Retail sales remain muted with consumers under pressure
20/09/2019 - 14:31
Retail sales for July marginally declined to 2 percent year on year as sales growth continued to reflect a muted demand in South Africa, with consumers’ discretionary income under strain.
4 reasons to be hopeful about South Africa’s economy
12/09/2019 - 14:40
Markets responded positively to South Africa’s economic growth rebounding in the second quarter, up 3.1%, and 0.9% for the year to June 2019.
Smarter mobility key to a sustainable South Africa
11/09/2019 - 13:19
The World Economic Forum has revealed that by 2050, 70% of the world’s population will be living and operating in urban areas. Considering the resultant congestion and air pollution, which are already challenges requiring mitigation in 2019, mobility and energy should be top of mind for those making the shift towards cities of the future.
Manufacturing production shrinks for second month in July
11/09/2019 - 13:01
Manufacturing production recorded its second consecutive contraction in July, in line with analysts’ expectations.
Eskom: The largest threat to the stability of the SA economy
10/09/2019 - 09:45
On Tuesday 23 July, South African Finance Minister Tito Mboweni tabled a bill before the National Assembly which would see national state-owned power utility Eskom benefit from an allocation of R59 billion over the next three years.