# General Business Category > Business Finance Forum >  How would an interest rate increase affect you?

## I Robot

It has to come one day - an interest rate increase.

Fin24 raises the issue of debt levels and our ability to deal with it in an article today. The bit that got me was this:


> The household debt-to-income ratio of South Africa rose from 49.1% in the final quarter of 2002 to 65.5% in the corresponding quarter of 2005.


And that got me thinking - how ready are we for this day.

There is no doubt that a lot of people are leveraged to the hilt, and will get seriously hit by even a small move. And probably the folks that will get hurt the most are businesses with unsecured debtors - mainly small business.

So are *you* ready for the day or do you think it'll never come?

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## Dave A

Is crunch time coming. According to this story on Fin24, we might know quite soon.

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## AndreMorgenrood

It will hit me personally, my business, and the amount of money people have available will dry up hitting my business even harder. 

But I suppose "The Writing's on the Wall" as they say.

Andre'

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## Marq

My economic development friends reckon we will be let off the hook this time round, but they expect half a percent next time and one before the year end. 

It has to come - the only question is when. Prior to talking to these friends, my thoughts were that we will see the first hit now.

These guys have two doctorates and three masters between them on this subject of economics and it still anyones guess - Hope your gearing is in order. Good Luck Andre - hold tight.

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## Marq

You know why we have economists out there??

To make the weathermen look good!

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## Dave A

Good one Marq :Rofl:

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## THEUNIS

You guy's are right even if you are prepared for it it still hurts, we have just had another feul increase and this does not do us any good in the service industry as when funds dry up we tend to suffer first.
I am sure that there are going to be some very sad people out there that have over capitalised. This will effect the ecomomy even further.

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## Marq

I have fired the economic side of my friends I was speaking about earlier. From now I will just discuss philosophy with them (well they cannot be wrong there - can they?)

In the meantime - batten down the hatches and tighten the buckles - the first hit is here.

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## Candy Bouwer

> I have fired the economic side of my friends I was speaking about earlier. From now I will just discuss philosophy with them (well they cannot be wrong there - can they?)


Hey Marq, maybe you would also like to air your views in the business philosophy forum. The thread tapered off on "Cognitive dissonance" 
Candy :Banghead:

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## Dave A

To a certain extent we can be relieved that they took action now. 

The committee has been accused of being slow to react in the past, particularly when everyone was saying the rates should go down. The writing was on the wall (I hate being right this time). The currency dip was just a bit worse than usual, a persistent trade deficit, growing personal debt approaching alarming levels, a multiple whammy that could not be ignored.

The longer they let it slide, the more acute the pain is going to be.

The economists siding against a change was probably the clincher :Big Grin: 

That half point is going to dampen down even further a few sectors that are already off the boil. The next quarter is going to be interesting.

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## Marq

Haha - Post decision studies of what should have happened - an exact science. This is the haven of the economist, who will now tell us what will happen in the next quarter to interest rates despite the fact that they completely got it wrong this past quarter. :Roll Eyes (Sarcastic):  

Ok so lets leave these sorry econmists alone now and put in our own thoughts - I reckon the interest rate will stay the same next quarter and go up 50 points the following. this is based on the same reasons they gave today for the increase. I do not see much change happening over the next 6 months given the current world scenarios.

This is of course unless Iran develops their uranium enrichment story faster, causing a gold rush or one of these briliant politicians in our midst here say something more stupid than they have done already. We still have Zumas story and the fall out to happen as well in this period. :Batman:  The world cup should take their eyes off the ball for now.

Given all that - what say you all? We can take a poll or bets - or a poll to bet? :EEK!:

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## Dave A

Gave up gambling years ago. I'll be happy to post a calculated guess closer to the time.

Although.... 

Can I bet that the economists will be wrong again?

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## Dave A

It's coming up for the next round at the Reserve Bank.

My feel at ground level is that the increases have caused a dramatic cooling off - so I'm going to guess that Tito will do the right thing and keep rates unchanged this time.

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## Dave A

An interesting call from Trader Vic, once again suggesting that a 2% dose of pain is what is needed. I'm posting this on this thread, noting that at the time of the first post, there was not many who thought that an interest rate hike was even on the cards, let alone desparately needed. How quickly times change.




> A LARGE DEFICIT on the current account of the balance of payments in the past always worried me as an investor in listed shares. There was too close a correlation between the direction of the deficit and the price: earnings multiple at which the shares were trading. 
> Even just the turnaround of a surplus on the current account to a deficit in the past caused a fall in the p:e at which shares were trading. Of course, the fall of a p:e means that share prices fall. 
> 
> South Africa not only has a large deficit on the current account of its balance of payments but in the fourth quarter of 2006 the country also had a huge, unhealthy, structurally dangerous, unprecedented - and call it other names if you like - deficit of an annualised R143bn, or 7.8% of SA's gross domestic product.
> 
> The student who wonders why there's a correlation between the current account deficit and share prices would be well advised to take a look at the latest SA Reserve Bank Quarterly Bulletin. The table on page S 124, which deals with the financing of gross capital formation, shows that SA's gross capital formation was R350bn last year. However, the country's gross savings were only R239bn. 
> 
> Investment therefore exceeded savings by R111bn - exactly equal to our balance of payments current account deficit for that full year. In 2006, that deficit was comfortably covered by the inflow of all kinds of capital.
> 
> ...

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## Marq

I think we are going into a period where the inflation rate is going to increase, (well more than the reported numbers) taking away the savings part of the economic equation solving the credit part of the equation as the squeeze comes and the interest rates will stay put or be increased slightly as per last year.  

With Municipalities crying for more as they battle to balance their budgets ( I thought Durban was strong, but the latest news tells me otherwise) Deficits being mentioned, the rand coming under more pressure, Pick and Pays prices increasing daily (I shop there daily and can no longer believe the inflation stats being thrown at us) - The average salary is not going to sustain the private sector for much longer. Spending on credit becomes a survival tactic rather than a convenience and interest rates take a back seat as Mr average battles to balance his own books never mind the country's books.

The Investment side of the equation now shifts to the rebuilding of infrastructure that has been left to decay over the past ten years. The Government reports a great sense of achievment as the growth rate hits an all time high and Mbeki denies that there was ever a problem in this area in the first place. :EEK!:   :Crazy:

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## duncan drennan

There are definitely inflation pressures which are building - of which food probably has the greatest impact on average households. You can have a look at the PPI figures, which tell a very different story to the CPIX figures.

The reserve bank's mandate is to keep inflation in the 3-6% band, and so far Tito has shown himself to target this just about exclusively. I think that is a good thing. If you look purely at the CPIX projections, there should be a downward trend over the year ahead.

The thing which we can't handle are shocks to the system, like an oil price spike, but I do feel that Tito has slowly been trying to stack the odds in out favour, rather than follow a dramatic interest rate shock, like Turkey. I suspect we're going to see another 0.5% increase, which will pressure people, but will not have the dramatic psychological impact that a large rate hike would have. I think that small, continuous rate hikes are better.

If you have a look at the figures for PSCE, you'll also see that it has been rising - mainly driven by company borrowings. To jump the interest rate would have a significant impact on the growth goals of the country, which could lead to a negative cycle of investors taking money out of the country, rather than putting it in, taking away our ability to fund the trade deficit.

Tough one to balance. I'm in favour of a further 0.5% increase.

EDIT: also have a look at the correlation between CPIX, and PPI, particularly around the time we had about 12% CPIX

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## Dave A

Without even looking at the numbers, I definitely feel that hard liquidity is dwindling. I base this on clients being more price-sensitive and on average slower to pay.

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## duncan drennan

> Without even looking at the numbers, I definitely feel that hard liquidity is dwindling. I base this on clients being more price-sensitive and on average slower to pay.


Do you think interest rate hikes, (i.e. further "dwindling hard liquidity) will result in more savings, or more debt servicing? (on a consumer level, taking your recent case into account)

Maybe to phrase it a different way, do people really change their lifestyle when faced with what is effectively a lower income? It does catch up with you eventually though....

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## Dave A

Faced with dwindling disposable income, the tightening of belts is not much of a decision. 

The trouble is that high interest rates reward the "haves" and puts the "have nots" in difficulties. Add that most of the "have nots" have been indulging in credit funded acquisitions lately that may or may not be classified as investments... It could also hurt loan and dividend funded BEE deals.

Set all this against the current political priorities and you see the dilemma. There is a tough decision looming - let things slide to appease the "have nots" in the short term (but probably cause more pain later) or follow a course of tight fiscal discipline with better medium term prospects.

The big warning bells come from the trade deficit. Of course, the USA has been managing quite nicely on a fair sized trade deficit for a long time - but the deficit itself has been comparatively stable. We seem to be seeing a big swing here with evidence it is gaining momentum if anything.

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## Dave A

South Africa's Consumer inflation excluding interest on mortgage bonds (CPIX) inflation rate rose by 4.9 percent year-on-year in February from a 5.3 percent rise in January, Statistics South Africa said on Wednesday.

The data, which came in below forecasts, showed that the all-items consumer price index (CPI) increased by an annual rate of 5.7 percent in February compared to January's 6.0 percent.

CPIX fell by 0.1 percent on a monthly basis and headline CPI declined by 0.1 percent.

Economists interviewed by I-Net Bridge were fairly cautious in their reactions, stating that the good data may not have enough impact to keep interest rates in check.
full story from Business Report here

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## duncan drennan

For more info on Feb's CPIX, you can have a look at RMB's data brief. They are predicting a breach through 6%, up to 6.2% in April. Also, for some interesting reading, have a look at www.fnb.com/economics

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## Dave A

I get the sense that those numbers may be an anomaly as opposed to signs of a reversal in the general trend.

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## duncan drennan

> I get the sense that those numbers may be an anomoly as opposed to signs of a reversal in the general trend.


I agree. They don't state that explicitly, but they do mention a couple of other things (such as prediction for March which is 5.7%, and predicted 6.2% in April), which indicate a more sinister rate meeting than most will expect.

I'm pretty sure we'll see either a 0.5% increase in rates (most likely) or some sort of change to the way the reserve bank lends money to the banks (to curb credit growth).

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## stephanfx

It is almost 4 weeks ago, any new news pertaining this? Are there any news to support this, I know the petrol has gone up now, and that a interest rate hike is immanent, but is there any indication as to when maybe and how it will affect businesses in general?

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## duncan drennan

The MPC meets every two months (meeting dates for this year). We'll have to wait and see what the changes are to the inflation outlook at the next meeting. As to the effects, well, that's hard to gauge Ã¢â¬â not even the economists can agree  :Wink:

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## Dave A

This article is not very encouraging in terms of short term prospects on interest rates.



> Borrowers will almost certainly be disappointed in their hopes that prime and mortgage rates will peak at their current levels of 13 percent.
> 
> Rates in both money and bond markets are pointing to prime at about 13.5 percent by the end of the year - in line with the Reuters' consensus forecast of 11 of South Africa's top economists, which put prime at 13.5 percent in the third quarter, before a decline to 13 percent in the second quarter of 2008.
> 
> One important pointer is the difference between the yield on the benchmark R153 bond and the inflation-linked R189 bond, which measures inflationary expectations. 
> 
> This differential was currently 620 basis points, said Ian Cruickshanks, the head of Nedbank Capital's strategic research unit. 
> 
> In other words, the bond market expects inflation to remain above the ceiling of the Reserve Bank's target range of between 3 percent and 6 percent, which increases the probability of a further rate hike. 
> ...


I _do_ hope that some official numbers emerge before the next central bank meeting that might indicate the extent of the NCA impact.

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## Graeme

You will all be familiar with developments in the US Ã¢â¬ÅSub-PrimeÃ¢â¬Â market - where irresponsible financial institutions have been dishing out mortgage finance to very poor credit risks, with these people now starting to default on their loans;  over a million to date, and rising fast.

One of the many advantages of being retired is being able to watch TV in the afternoon (morning in the USA) and watch news there as it develops.  I have watched Bernanke (Chairman of the US Federal Reserve) giving testimony before Senate House Committees on several occasions lately and whilst he has been very careful not to frighten the capital markets, some of what he has said about the sub-prime market, or rather what he has not said, is beginning to fill me with unease.  These things always start slowly but when panic sets in a small trickle of stones can become an avalanche very quickly.   

There is little reason why increasing American loan defaults should trouble us unduly in SA; our biggest trading partners by far are the EU and the UK, but it is a fact that unease in the USA can cause a sharp intake of breath on capital markets here. 

If I were in business instead of sitting at home and watching my investments, and if I were in the process of arranging development capital finance right now, I would be inclined to try to get it all signed and sealed at a fixed interest rate chop-chop, and I would not be taking on any loan servicing commitments that I was not very confident of meeting.

IÃ¢â¬â¢ve been investing money for forty years now and believe me, history repeats itself with monotonous regularity.  IÃ¢â¬â¢ve seen this all before.  IÃ¢â¬â¢m not doing any drastic re-arrangements right now,  but IÃ¢â¬â¢m not touching any risky stuff either.  Caveat emptor!

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## Dave A

> IÃ¢â¬â¢ve been investing money for forty years now and believe me, history repeats itself with monotonous regularity.  IÃ¢â¬â¢ve seen this all before.


And it starts with Wall Street while we slept.

As you have said to me so often - *fundamentals*.
You're getting better at reading the timing on these calls, Graeme.

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## duncan drennan

> And it starts with Wall Street while we slept.


Hmmm, had to search around a bit for this,




> New York - Wall Street suffered its second-biggest plunge of the year on Thursday, leading global markets lower as investors fled stocks amid increasing uneasiness about the mortgage and corporate lending markets.
> 
> The Dow Jones industrials briefly fell more than 400 points, while Treasury yields plunged as investors moved money into bonds.
> 
> Investors who had been able to shrug off discomfort about subprime mortgage problems and a more difficult environment for corporate borrowing appeared to finally succumb to those concerns.
> 
> The Dow's drop is the biggest since it plummeted 416 points on February 27 after a nearly 10% decline in Chinese stock markets.
> 
> Feeding the selling were concerns that higher corporate borrowing costs will curb the rapid pace of takeovers that have driven major indexes this year.
> ...

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## duncan drennan

Well, all looks set for another rate hike in August. Interestingly enough the NCA seems to have had little impact on credit extension.




> Growth in demand for credit by South Africa's private sector quickened to 24,92% year-on-year in June, data showed on Tuesday, hardening the case for another interest rate increase next month.
> 
> The Reserve Bank said credit demand growth was a touch faster than May's 24,84% increase, while during the same period, the broadly defined M3 measure of money supply grew by 23,35% compared to 22,67% the previous month.
> 
> "These [credit] numbers are a lot higher than our expectations and what the market expected. We had thought we would see the effects of the NCA (National Credit Act) come through in these numbers. It looks like there is no effect at all," said Russell Lamberti, economist at ETM.
> 
> Full story on M&G

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## Dave A

I think the crunch was around when the finance was applied for/granted. Quite often the actual credit extension comes later. (About the only reason I can think of off the top of my head).

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## duncan drennan

The other thing that I thought might be a factor is that not as much money as expected is actually affected by the NCA. Those borrowing large amounts of money probably have net asset values over R1mil, and the bulk of the money may be going to juristic persons. Not sure, we'll have to watch the numbers over the next couple of months.

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## duncan drennan

Based on the banks' actions it looks like we're heading for a further 100 basis points increase.




> Banks expect interest rates to rise in the short term.  They are currently paying nearly a percentage point more for 12-month funding than they are for three. This indicates that they are expecting two more 50 basis point rate hikes, says Coronation (JSE: CML) money market manager Tania Miglietta. Either that or there is a need for money available for that time horizon.
> 
> Banks are paying 10,8% for 12-month negotiated certificates of deposit (NCDs), which is a significant premium over shorter-term NCDs. This means that if interest rates donÃ¢â¬â¢t go up, they might have a squeeze on their profit margins, because they will be paying a higher price for money, but will be lending it at an unchanged rate.
> 
> Full article on MoneyWeb

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## Dave A

Or they could just jack up their base rates anyway. I don't think banks are obliged to set prime based on the Reserve Bank's rate.

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## duncan drennan

Tito has pretty much indicated that we should expect a rate hike, but I found this comment really intriguing, and I wonder how much it would impact on the SARBs next steps,




> "Should interest rates go higher" we "might see lots of insolvencies," Mboweni said. "We'll see lots of repossession of cars, houses, which we don't want to see."
> 
> Full article on MoneyWeb


And on the lighter side, George Bernard Shaw's view of economists, "If all economists were laid end to end, they would not reach a conclusion."

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## Dave A

> "Should interest rates go higher" we "might see lots of insolvencies," Mboweni said. "We'll see lots of repossession of cars, houses, which we don't want to see."


Nice to see some concern for the state of the voters in all this. But he has his mandate - an inflation target. 

It's going to be up to government to make the hard decisions if they're going to rein inflation in without beating us to a pulp with the interest stick.

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## duncan drennan

Fascinating!




> 23% of homeowners (aged 21+) have heard the phrase 'mortgage loan' and know what it means. 40% have heard the phrase 'interest rate' and know what it means. (FinScopeTM 2006)
> 
> From Eighty20's Fact-a-day


@Dave: I see they have a javascript thingy for adding to websites

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## Dave A

> @Dave: I see they have a javascript thingy for adding to websites


Hmm. Nice. But where to put it? The news headlines page?

Maybe we should hunt down a few similar "goodies", such as Quote a day and that sort of thing - then we could set up a seperate page.

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## Marq

> the phrase 'mortgage loan' and know what it means


Do they really know???

Mort = Death; gage = pledge or I prefer the more obscure = grip

So very apt - mortgage = death grip 

Start a fun page of useless information and dinner table discussion items!

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## duncan drennan

Well, yet another 50 basis points (here is the full statement of the MPC).




> The MPC identified a number of risks to the inflation outlook and is of the view that these risks remain on the upside


I'm casting my mind back a while to this post, where Trader Vic was calling for a 2% hike. What where the rates back then, and have we moved up 2%? I think so.

I wonder how different the current economic environment would have looked if the hike had been a shock, rather than a gradual one?

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## Dave A

I see the general analyst sentiment is that the increase was unexpected. Goodness knows why. The narrow mandate of inflation targeting made it entirely predictable.

Tito and team have been consistent. They may have debated other factors, but the deciding factor for them is the inflation rate. And until that mandate is broadened, they don't have the space to maneuver.

At least everyone seems to agree that the economy is cooling off.

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## duncan drennan

> IÃ¢â¬â¢ve been investing money for forty years now and believe me, history repeats itself with monotonous regularity.


Graeme, I'd be interested to know what your thoughts are on the markets movements yesterday....

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## Graeme

I don't think we will see the end of the repercussions for months, or even years, but life goes on and already the equity values of the sound companies upon which the world economy depends are returning to their former values; except,of course,for many banks.

The bail-out of the banks was vital, and was handled very well.  We could feel that the banks should have been severely punished for what they got up to, but that could have been ruinous to many countries' economies.

As far as interest rates are concerned, I don't believe that the answer to inflation necessarily requires an interest rate squeeze - there other ways of cooling off the banks' lending, one of which would be to increase the amounts that the banks have to have on deposit with the Reserve Bank.  The horrid thing about interest rate increases is the way that ordinary mortage holders get squeezed and  business suffers.  Economists are far from convinced that inflation may only be controlled by interest rate escalations.

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## Dave A

Business conditions are clearly tightening. The following two stories give hard evidence of tough times ahead.



> The Gauteng economy is slowing down as several industries experience a drop in business-activity levels, said the Gauteng Business Barometer (GBB).
> 
> Spokesperson Mike SchÃÂ¼ssler said the GBB for September dipped by 7% to 140 index points when compared with the same month last year. 
> 
> SchÃÂ¼ssler said: "The index also shows a marginal 0,1% decline when compared with activity levels in August. 
> 
> "September's performance echoes a continuing downward trend from the beginning of the year, mainly due to higher interest rates and inflation," he said.
> 
> According to the GBB, the Gauteng economy is feeling the strain due to the higher interest rates.
> ...


And then an indicator from the motor industry.



> New vehicle dealers are under severe pressure because of a steep downturn in retail car sales which is expected to lead some to close.
> 
> Eric Scoble, the chairman of the National Automobile Dealers' Association, said yesterday that sales figures from the National Association of Automobile Manufacturers of SA (Naamsa) created a misleading picture of market conditions.
> 
> Scoble said dealer passenger vehicle sales reported to Naamsa last month were the worst since December 2004, comprising only 23 000 units out of a total market of 32 257 passenger vehicles reported.
> 
> The figure was 19.9 percent lower than in September 2005 and 20.1 percent lower than September last year.
> 
> Scoble said the non-dealer market, comprising sales to car rental companies, fleets and the government, along with manufacturers' internal fleets, had concealed the true dealer picture.
> full story from Business Report here


I see major consequences ahead. Growth is desperately needed for the transformation that government desires. And we look to be heading in exactly the opposite direction.

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## Dave A

> I don't think we will see the end of the repercussions for months, or even years,


You're not kidding. Some big dominoes are starting to look shaken.



> Fear and mistrust gripped Wall Street on Monday after Citigroup's CEO quit in the wake of mounting credit losses and an influential money manager called the subprime mortgage market a "$1-trillion problem".
> 
> Charles Prince's resignation from Citibank on Sunday -- the second high-profile Wall Street CEO ousted in less than a week -- came as the largest United States bank said it will write off as much as $11-billion in losses tied to subprime mortgages.
> 
> US stocks followed European shares lower, while safe-haven bonds rallied and even the downtrodden dollar ticked up as skittish investors wondered which bank might be the next to disclose substantial losses.
> 
> Prince's departure came just days after Merrill Lynch & Co CEO Stan O'Neal was kicked out following an $8,4-billion write-down.
> full story from M&G here

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## The Duck

I believe that what the States are experiencing is being experienced by all Western countries with largely capitalist ideologies . Over the past decade big business has taken over global politics and they generally control economic policy . Governments are mere puppets of global companies allowing them to exploit labour to such a degree that the average individual's disposable income has shrunk to such a degree that more and more people are buying basic goods on credit. Wage increases are kept as low as possible allowing big board directors to report bigger profits to the shareholders so that they can earn that fat incentive bonus.

Economists are not even sure about the policy of increasing lending rates , which I believe forces people at this point to go more into debt. Since the middle of last year the repo rate has gone up by about 600 basis points . Homeowner's with bonds of aprox R 1million are now paying R 2500 P/M more.

In SA the population group that suffers the most are the emerging black middle class who invested in property about a year ago. More and more people are putting their homes on the market because they are battling to finance their bond repayments. 

Yes , in short I agree that it will take many years to improve as the big guys will refuse to acknowlegde that the capitalist ideology is the cause of our current problems.

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## Dave A

Every now and then I've noticed we get these posts that lay the blame on capitalism. In most instances it's linked with some specific disaster, such as the sub-prime issue. Whilst rejecting capitalism on a narrow issue is akin to throwing out the bath with the bathwater, I question these protests on a more holistic level.

Here's the problem with these statements as I see it. Capitalism is only a part of any particular socio-economic model. For example, if you are going to condemn capitalism because of the sub-prime issue, you also need to condemn democracy, freehold ownership of property and perhaps even social welfare. Because those were the contributing elements that provided the environment for the problem.

The other question is if we do away with capitalism for our economic model, what would we replace it with - socialism? Now think about that for a moment. What does that mean exactly? When you get down to it, instead of individuals who have carved their ownership stake, ownership now rests in the hands of the state.

Are you that confident that the state will use its ownership position any better than private individuals?

We have enough trouble pursuing balance with economic power sitting in private hands and social power sitting in the hands of elected officials. Can you imagine if both power bases were sitting in the same hands?

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## The Duck

Possibly out of my league here - but I am not proposing that we throw out the bath with the bath water. In most healthy economies there is a mix of socialism and capitalism .There needs to be certain checks and balances to stop the haves exploiting the have nots. In my laymans reading of our current situation - people are buying more on credit as their disposable incomes are reducing. 

Why ?- because big business is allowed to keep salary increases low in order that they achieve their profit targets. Salary increases in general have lagged behind increases in cost of living. To stop this I believe that government should not allow this to continue and that directors should not be able to qualify for their performance bonus if they achieved it by keeping salary increases low. I have heard that one of the European countries have already enacted a regulation to stop big business .In the current system the rich get richer while the poor get poorer and the gap just gets bigger. A recent news article compared South African executives disposable incomes with other countries and with the exception of the USA our guys disposable incomes were bigger . Interesting...

But listen I am not a business professional I am a mere real estate agent so what do I know?  In my simple knowledge I just do not see how increasing the interest rates is going to stop people buying on credit. In my industry people are prioritising their spending - If there is no other avenue they are disposing of assets or getting out of the property game because they are struggling to finance their bonds.   So maybe the inner circle should rather focus on reversing the crunch on the average Joe's disposable incomes.

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## Dave A

> Possibly out of my league here -


You're definitely not out of your league here. You raise lots of very valid points. In fact I personally agree with every point, except that the culprit in chief is capitalism.



> In most healthy economies there is a mix of socialism and capitalism.


Exactly. Done correctly they are not conflicting conditions. There is a healthy balance between social and economic priorities.

More back on point, what do you see as the responsible solutions to the property market crunch?

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## Dave A

I always enjoy reading Bruce Cameron's articles. This latest, tied with The Duck's comment about the '97/8 interest rate hike and the way the property market bled then, had me thinking that perhaps the best thing is to have a full blood-letting.



> Only two weeks ago, the potential losses from the crisis were estimated at US$600 billion. This week, they were up to US$1 trillion.
> 
> The problem is that the corpses are still being hidden and so it is difficult to assess the full impact of the crisis. One thing is certain: the consequences of the irresponsible lending to people in the US will be felt by individuals around the world, including South Africa, as, like the Black Death of 1347, its effects ripple inexorably outwards.
> 
> The only answer to the sub-prime mortgage debacle is for the full pain of the crisis to be absorbed now - and it will be severe.
> full story from Personal Finance here

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## duncan drennan

Brace yourselves for another one...




> Speaking to the finance portfolio committee on Wednesday, Mboweni said: "If I was the only member of the Monetary Policy Committee (MPC), I would definitely increase rates in December."
> 
> The bank staff's forecast for inflation in the coming months shows inflation increasing above the 6% target for part of 2008 before dropping back into the target range before the end of the year.
> 
> He told the committee: "The inflation picture for South Africa is that pressures are on the upside, whether from electricity or vegetables. When the forecasts indicate that inflation is likely to stay above the target, the task of the central bank is to tighten monetary policy."
> 
> He said that there was a period recently when the MPC should have tightened rates, but did not do so. "It was an error," he said.
> 
> Full article on M&G Online

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## duncan drennan

Next week holds the next decision on interest rates, and I though that this article from FNB economics serves as a good point for starting a discussion.

They discuss Taylors rule,




> Taylor's Rule
> 
> Estimating where interest rates should be.
> 
> According to Taylor's Rule, the Prime Interest Rates should currently be :
> 
> (a)   "neutral" Real Prime Rate: *5.5%*
>        (average September 1989 - July 1995; 1999 - 2007)
> 
> ...


Take note of the note about how Taylors rule is more suited to efficient economies (i.e. USA, EU) and is typically higher in developing economies.

One of the things that worries me about this analysis is the projected CPIX for Q1 2009 - is that really accurate? I think we may still be in for some inflationary shocks (food, energy) over this year.

Which way do you think the interest rates and inflation are going?

----------


## Dave A

> One of the things that worries me about this analysis is the projected CPIX for Q1 2009 - is that really accurate? I think we may still be in for some inflationary shocks (food, energy) over this year.


They're dreaming. Watch labour inflation this year alone.

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## Dave A

CPIX and CPI up. Now PPI, which tends to lead out CPIX, is up much higher than expected.



> South Africa's producer price inflation (PPI) accelerated above forecasts to 11,2% year-on-year in February from 10,4% in January, official data showed on Thursday.
> Statistics South Africa said the headline number, representing domestic output, stood at 1,3% on a monthly basis, compared with 1% previously.
> 
> Economists polled by Reuters last week forecast that annual PPI would come in at 10,7%, while the monthly rate of increase was seen at 0,8%. 
> 
> Fanie Joubert, economist from Efficient Group, said: "This number is obviously higher than our expectations, which is quite negative considering that CPI came in par with market expectations yesterday [Wednesday].
> 
> "This just gives more fuel to the Reserve Bank to hike rates when they meet again on April 9 and 10." 
> 
> ...


Any bets *against* another interest rate hike?

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## Moneymaker

April being a short month and hence consumer spending will be lower is the only thing that might stall the rate increase.....it's certainly not going to be going down....

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## Dave A

Hands up all those who predicted an increase.



> South African Reserve Bank Governor Tito Mboweni has raised the repo rate, at which the South African Reserve Bank lends money to banks, by 50 basis points to 11,5% following a two-day meeting of the bank's monetary policy committee. 
> 
> The prime overdraft rate therefore increases to 15% and the tightening cycle that began in June 2006 has now reached 450 basis points.
> 
> The most recent central forecast of the Reserve Bank indicates a further deterioration in the inflation outlook when compared with the previous forecast, said Mboweni. Inflation is now expected to peak at an average of about 9,3% in the first quarter of this year, and thereafter to follow a downward trajectory. 
> 
> It is expected to return to within the bank's inflation target range of 3% to 6% by the fourth quarter of 2009. 
> 
> CPIX inflation had surged through the top end of the bank's 3%-to-6% band and hit a high of 9,4% year-on-year in February.
> full story from M&G here


The comments from various economists is interesting - mainly because the focus seems to be on inflation. But I wonder how much of a tipping point the trade deficit had on the decision.

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## Chatmaster

I think this increase is once again punishment towards the consumer due to the poor leadership from government. I also can not see how the increase will lower the inflation rate. People closed the taps a long time ago according to an interview I listened to last week on radio. Also the impact of the NCA is still flowing through the economy. At the current moment there are to many other factors that are dictating the inflation percentage so I think the old strategy of increasing the interest rates are the wrong tool use in our very unique circumstances.

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## IanF

My hope with this increase it will strengthen the Rand. A lot of inflation is exchange rate driven so a stronger rand should help with this. :Cool:

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## Dave A

> South African bond yields jumped on Thursday and the rand was firmer against the dollar after the central bank increased interest rates while local stocks ended in slightly negative territory.
> 
> The central bank raised the repo rate by 50 basis points to 11,5%, the ninth increase since June 2006, citing a worsening inflation outlook.
> 
> Bond yields surged, with those on the 2010 bond up 23 basis points to 9,72% and those on the 2015 issue up 19,5 basis points to 9,18%.
> 
> The rand was trading at 7,78 to the dollar at 3.50pm, 0,94% firmer than its previous close of 7,8540.
> full story from Business Report here


With interest rates in the west going down, our interest rate increases become attractive to foreign investors.

What amazes me is Trevor Manuel is still predicting 4% GDP growth.

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## duncan drennan

I really think that it is worth reading the MPC statement. Here are some things which stood out for me:




> The inflation outlook is being influenced by a series of supply-side shocks emanating from the international oil and food prices which are posing challenges for inflation-targeting countries in general. Domestically, there is evidence of generalised price pressures and the prospect of further substantial electricity price increases will also delay the return to within the inflation target range.





> CPIX inflation has maintained its upward trend, reaching 9,4 per cent in February 2008. Petrol and food prices were again the main drivers of inflation and increased at year-on-year rates of 29,5 per cent and 14,3 per cent respectively. If food and energy prices were excluded, CPIX inflation would have measured 5,6 per cent.





> A number of indicators suggest that output growth will be below potential in the coming quarters, although infrastructural investment programmes are likely to underpin the overall growth rate.


One also has too look at all these things in the larger global context. The current asset losses due to the massive financial write-offs of large banks around the world is being compared to 1929 - and that is not something that economists do lightly.

I think in the bigger picture South Africa is certainly doing okay, even if we are being buffeted a bit. Unfortunately the timing of the Eskom debacle has been quite bad. We might have seen even larger foreign inflows if our mines were producing at full speed.

We also have the benefit of large public works programmes (largely for 2010) without which we may have been up the creek without a paddle. But we're not.

I think that both Trevor and Tito have prepared the country well for these challenging times.

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## Marq

> and that is not something that economists do lightly.


I believe that's half the problem in this world of today. Too many economists are being listened to and they all believe they are experts in the science of finance. :EEK!: 

This may explain it better.



> "An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today."
> ~ Laurence Peter (1919 - 1988), Canadian educator


The other half of the worlds economics problems........glad you asked. Did I mention economists with theories about what could would might happen if this or that happened. 

Have you seen any finance guys being interviewed on how your finances are being affected or any business type people being interviewed on their theories as to whether business with be affected. 

All we see are politicians and economists with a TOE from lightbulbs, electricity, water to whats in your wallet but have any of them been correct. We hear - see I told you so.......or......well it could have gone the other way if only bla bla bla. :Yawn:  :Shoot: 

Ok so seeing as this is bash the economist day - why did they invent economists?
.
.
.
.
To make the weathermen look good.

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## Dave A

And inflation keeps marching on up.



> South Africa's targeted CPIX (consumer inflation less mortgage costs) rate jumped to a new five-year high of 10,1% in March, beating forecasts and hardening expectations for another interest-rate increase.
> 
> Statistics South Africa said the targeted measure jumped from 9,4% in February to its highest level since December 2002, and climbed 1,6% month-on-month.
> 
> The all-items consumer price index (CPI) increased by an annual rate of 10,6%, compared with 9,8% previously.
> 
> Analysts said the strong numbers showed there was room for more rate hikes, adding to nine 50-basis points increases since June 2006, the latest of which was announced earlier this month.
> full story from M&G here


Marq, you are really getting vindicated. I can only guess economists don't do their own shopping or tank up their own cars with fuel.



> "I think we're quite surprised by how strong it's actually come in," Russell Lamberti, economist at market analysts ETM.
> 
> Another economist, Mike Schussler from T-Sec, said: "The nightmare continues. Inflationary pressures are growing. This is way above my expectation."

----------


## duncan drennan

I quite liked the way that Cees Bruggeman summed up the SARB's current predicament.




> It has been clear already for many years that the SARB considers itself a national team player, alongside government, labour unions and business.
> 
> And as long as everyone whistles from the same song sheet, everything should be fine with the nation.
> 
> In particular, inflation expectations should remain contained and the SARB can keep interest rates low and supportive of growth in the economy.
> 
> But if the other team players do not play the game as it is supposed to be played, the SARB is apparently left no choice but to play the heroic role history has allocated it, and that is to defend the nation at all cost against raging inflation.
> 
> For otherwise what is happening next door in Zim could easily also happen here, 165 000% inflation and all that, and this would clearly never do.
> ...

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## duncan drennan

> Letâs assume our annual productivity gain to be somewhere in the zero to 3% range (zero for some, and up to 3% for others, with an average of 2%). The SARBâs inflation target suggests underlying unit labour costs should increase at most by 5%-6%. Adding back the productivity gain suggests wage increases of 5%-9% maximum.
> 
> Those with zero productivity gains (there are many) shouldnât qualify for 9% wage increases, while those with 3% or better productivity gains shouldnât get wage increases of as little as 5%.
> 
> Yet guess what happens in an economy pressed to the edge of recession, if not into it?
> 
> The most productive workers in the private sector carry the full brunt of economic slack, more competition, losing jobs, and working for employers under enormous pressure to contain costs.       
> 
> Chances are excellent those workers will be made to work harder, improving productivity, yet getting only a small low single-digit wage increase.
> ...


How do we marry the rising pressure of inflation (and interest rate hikes) with the inherent requirement of keeping labour and price increases below the required target?

*People are looking for a "living wage" and want higher increases, but don't seem to link that with the required increase in production.*

The problem with wage increases which are higher than the increase in productivity is that they directly drive inflation. You get exactly the same thing (1 worker producing _x_ amount) but pay more for it.

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## Dave A

I think an underlying problem is that wage increases are being costs driven (as in living costs for the labour) as opposed to value-add driven (a number proportional to the contribution made to the company's overall production and effectiveness).

So we have wage increases which are justified on the employees' personal expenses model, but the business has to finance this from a value-add driven model - the only way they have a business in the first place. When the two systems get out of synch, we have problems.

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## duncan drennan

> So we have wage increases which are justified on the employees' personal expenses model, but the business has to finance this from a value-add driven model - the only way they have a business in the first place. When the two systems get out of synch, we have problems.


Not just that, but it is out of synch with inflation targeting. Wage increases (and also company price increases) based on a personal expense model lead directly to the so-called second round inflation effects. The reserve bank basically has one tool and that is interest rates. Raise interest rates to combat inflation, which pushes up personal expenses again. And so we go on the merry-go-round.

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## Dave A

> Not just that, but it is out of synch with inflation targeting.


Food and fuel inflation is what is really throwing the balance out. And perhaps to some extent the credit crunch.

I was thinking though - the one thing the higher interest rates *are* doing is supporting the Rand. Given the pricing pressure on fuel (for example) is external, that *does* help directly.

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## Dave A

Knock me down with a feather. This is rather unexpected.



> South African private sector credit growth jumped to 22,62% year-on-year in March, knocking expectations of a slowdown in spending and hardening the case for more interest rates increases. Central bank data on Wednesday showed growth in demand for credit leapt from 20,79% in February, while M3 money supply growth edged higher to 21%.
> 
> Analysts said the data, following hard on the heels of strong inflation numbers last week, would push the Reserve Bank towards further monetary policy tightening.
> 
> "Nobody is going to like this. Everyone was hoping for lower figures," Brait Merchant Bank economist Colen Garrow said.
> 
> "This gives the Reserve Bank ammunition for a rate hike at their June meeting. The numbers should have slowed down much more."
> full story from M&G here

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## Karenwhe

I don't know when the poll was put up, but I think if you put a new poll up if the interest rates go up again (which is highly possible), you would get completely different results.

Then you can compare how many points increase (from first poll to now) change the answers and how severely or not... have they changed in the period.

Just a thought.

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## Dave A

That poll went up 12 May 2006.

Yeah! I think the results would be very different now  :Stick Out Tongue:

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## duncan drennan

:Offtopic: 




> That poll went up 12 May 2006.


Wow. It is actually quite amazing. This forum and community has been around for about two years now, and just keeps growing and getting stronger. And this thread has been around just about the whole time. Loving it.

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## Dave A

I see the first post ever was 4th May 2006 by Alan - so I guess that's our opening day.

It certainly is a very different place to what went up that day.

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## Dave A

Reserve Bank Governor Tito Mboweni said on Tuesday rates would rise further if it was up to him and inflation targeting would remain.

Mboweni was speaking after the release of the bank's Monetary Policy Review, in which the bank said it was committed to bring inflation back into its 3 to 6 percent target band within a reasonable amount of time.

Communists and labour allies of the ruling ANC said on the weekend they would push for a review of inflation targeting, blaming the strict adherence to the policy for a 450 basis points rise in interest rates since June 2006.
from IOL here

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## Karenwhe

About reserve banks....

You may want to see this..... it is a bit off topic, though not much

http://www.youtube.com/watch?v=_dmPc...eature=related

If the link does not come right, go to youtube and type in: Zeitgeist - The Movie: Federal Reserve (Part 1 of 5)

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## Dave A

Oh BS! That video's theory is constructed on a fundamental flaw. The central bank only charges interest on *credit* extended, *not* on every note of currency it issues!

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## Dave A

The GDP figures for the first quarter are in.



> South Africa's economic growth rate slowed to 2,1% in the first quarter of 2008 on a seasonally adjusted and annualised basis, official data showed on Tuesday, citing a sharp drop in mining due to a power crisis.
> 
> Statistics South Africa said Q1 GDP on a seasonally adjusted and annualised basis slowed from 5,3% in the fourth quarter of 2007, and was the lowest figure since the third quarter of 2001.
> 
> Monale Ratsoma, economist at Absa Capital, said: "It's worse than expected, and the reason for that is a decline in mining production which is reflective of power outages that escalated in January this year. Elsewhere, the finance sector is slowing down and that is a reflection of high interest rates and slowing consumer spending." 
> 
> Mike Schussler, economist at T-Sec, said he had expected the figure to slow down even more dramatically during the quarter, and felt that "we are lucky to even get over 2% quarter-on-quarter growth".
> 
> "These figures make it very unlikely that we will see 4% -- even 3% -- growth this year."
> full story from M&G here

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## Dave A

And CPIX for April in at 10.4%



> South African Reserve Bank Governor Tito Mboweni said on Wednesday that the task of the central bank is to maintain inflation in the 3% to 6% target band, and with CPIX (consumer inflation less mortgage costs) now at 10,4%, "drastic" measures are required. 
> 
> "This is way above the upper limit -- you don't have to be a genius to tell interest rates have to tighten," he said.
> 
> Mboweni pointed out that if food is excluded from the CPIX, then it is above 8%. 
> 
> "So you can't just blame food," he said. 
> 
> He noted that it is also above 8% if petrol is excluded. And if both are excluded, inflation is still above the key 6% mark, indicating broad pressures.
> ...


I see analysts are speculating we could see a 1% increase in interest rates at the next monetary policy meeting due in two weeks time.

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## IanF

I heard on the news this Morning Tito talking about a 2% rate hike, I take that as it will be 1% so when it happens it doesn't feel that bad. :EEK!:

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## Dave A

Well, to stop the rolling ball, you need to get in front of it. I recall Trader Vic called for a 2% increase sometime last year. It might not be that bad an idea.

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## duncan drennan

I wonder what the right balance is between tightening your belt and suffocating yourself. Tricky one. Now if only the government and business could get on board with this inflation thing.

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## Dave A

If it's stagflation you're worried about, you are not alone.



> Inflation data released yesterday confirmed that South Africa is facing stagflation - a combination of slow growth and rising inflation. Statistics SA reported CPIX (consumer price index minus mortgage costs) inflation was 10.4 percent last month, while headline inflation was 11.1 percent.
> 
> The news, which came a day after disappointing figures on economic growth, put paid to expectations that CPIX, the Reserve Bank's benchmark measure of inflation, would peak in the first quarter.
> full story from Business Report here


By my understanding, government would have to ease up elsewhere to compensate for the fiscal discipline that is needed. My thought is along the lines of softening on labour legislation to encourage employment. Employers might take a few more risks in hiring if they could bail quickly and cheaply if it becomes clear they've made a mistake and need to adjust.

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## IanF

Inflation is here, the paper rep told me today there is a 5% increase in June and another in August. This due to rand weakness and paper price increase overseas. The effects of this will be more increases in paper products. Then to add to it the supply of bagasse (sugar cane waste) is slowing due to land claims, so they will have to use more wood pulp to make certain papers. So it goes. 
So be prepared for higher wage demands and so the cycle goes. :Confused:

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## Dave A

PPI up - and higher than expected too.




> South Africans yesterday received shocking news on the economy for the third day in a row. Statistics SA said producer inflation rose to 12.4 percent in the 12 months to April, well above the 11.8 percent forecast by economists polled by Reuters and the upwardly revised 11.9 percent in March.
> 
> A major factor in the price escalation for the 12 months to April was the 34 percent rise in petroleum and coal products. With a weighting of nearly 5 percent in the producer basket, this sector contributed substantially to inflation: prices of this category of products rose nearly 5 percent in the month.
> 
> Kevin Lings, an economist at Stanlib, said: "This was almost entirely due to a massive 21.1 percent month-on-month increase in coal prices." 
> 
> Standard Bank economist Danelee van Dyk said this component made the biggest contribution - 20 percent - to overall producer inflation.
> full story from Business Report here

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## Marq

Folks came from afar just to see
Two Economists who'd agreed to agree.
While the event did take place,
It proved a disgrace;
They agreed one plus one equals three.

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## IanF

> It proved a disgrace;
> They agreed one plus one equals three.


I see economics as an art not a science. The one thing that sticks in my mind from my economics course is oligopoly, this just because it is such a funny word. :Big Grin:

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## Dave A

I think gov has a sense of humour failure when it comes to oligopolies.



> oligopoly: A market dominated by a small number of participants who are able to collectively exert control over supply and market prices.


Unless they happen to dominate that particular sector of course - like electricity supply, fixed line telecommunications, road tolls, taxes...

----------


## Dave A

I see the trade deficit figures are in:



> South Africa's monthly trade deficit doubled in April, capping off a week of disappointing data that looked set to usher in more interest rate increases. 
> 
> The SA Revenue Service said on Friday that a sharp rise in oil imports pushed the trade balance to a R10 billion shortfall, pointing to further pressure on an already yawning current account gap. 
> 
> Citigroup economist Jean-Francois Mercier, said: "It is a particularly weak figure. It is way below expectations and ... points to a continued wide current account deficit."
> 
> The current account shortfall swelled to 7.3 percent of gross domestic product last year, the biggest deficit in 36 years.
> full story from Business Report here


36 years ago - that would be 1972. I wonder why we had such a bad trade deficit then?

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## Graeme

As a retiree living on investments, some of which involve interest income, I personally am delighted at the prospect of a further increase in interest rates!

Bring it on, Tito!

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## Dave A

As we sit waiting to find out how much the next interest rate increase is going to be, here is a story that suggests government should be doing more to reign inflation in.



> The government should do more to make the economy competitive as a way to curb price increases, economists urged on Monday. The comments came ahead of today's monetary policy committee (MPC) meeting of the Reserve Bank. The MPC will announce whether the bank's official repo rate will be raised by half a percentage point or more.
> 
> Chris Hart, an economist at Investment Solutions, said: "Open economies tend to have lower inflation as competition forces firms to become more productive." He suggested cutting import tariffs further to expose local producers to more competition from abroad. The proposal would be resisted by trade unions, who already blame the liberalisation of the economy during the past 14 years for job losses.
> 
> Hart also raised a number of regulatory and policy issues that had allowed certain sectors to be dominated by a single player or a handful of firms.
> 
> Dawie Roodt, the chief economist at Efficient Group, described state-owned or partially owned companies, such as Sentech and Telkom, as causing obstructions to growth.
> 
> He called for liberalisation of the labour market to allow wages to respond more flexibly to change.
> ...


Dawie Roodt definitely gets my nod on liberating the labour market.

There is something else here too. Much has been made of the current account deficit, but no-one seems overly concerned because the gap is being covered by capital inflows, right? Well, that might not be the case of late.



> The World Bank's Global Development Finance report released on Tuesday said the current account deficits of South Africa, Lebanon, Pakistan, Romania and Ukraine were expected to widen in 2008, noting that in some instances foreign direct investment inflows covered the entire gap.
> 
> This did not however apply to South Africa, where FDI outflows have risen significantly.
> 
> "In the case of South Africa, FDI outflows are estimated to be roughly equivalent to FDI inflows in 2007, providing no net external financing," the report said.
> Full story from M&G here


Yeah. All those emigrants add up.

Playing with the interest rates on their own doesn't look like it's going to cut it this time.

----------


## Dave A

June CPIX in, and higher than expected again.



> Record inflation, reported yesterday, once again raised a question about the merits of the current consumer basket, on which the inflation measures are based. Statistics SA said inflation in the CPIX (consumer price index minus mortgage costs) was 11.6 percent over the year to June.
> 
> CPIX is the Reserve Bank's benchmark measure of inflation. Last month's figure is the highest since the index was introduced in January 1998. It topped a forecast of 11.3 percent by 18 economists polled by Bloomberg. The high figure lifted the chances of a further interest rate rise when the Reserve Bank monetary policy committee meets in two weeks' time - after 5 percentage points of hikes over the past two years.
> full story from Business Report here


There are suggestions the figures are overstating the real situation and that the new basket to be introduced in January 2009 will reduce the numbers.



> AndrÃ© Roux and John Stopford, the joint heads of fixed income at Investec Asset Management, recently suggested that the official rate was 2.2 percentage points higher than the actual rate; other economists have made similar estimates. 
> 
> The recalculations would put CPIX at about 9.4 percent.


I have to question the direction this new basket is going on some items though. Is the average household *really* spending a smaller percentage of their income on food compared to 6 years ago? Or fuel for that matter? Remember, this is a basket minus interest type expediture. In cricketing terms, I'd be looking at the video for evidence of ball tampering.

There is one other thing that is being tossed in as "light at the end of the tunnel."



> Economists predict a big drop in January, when Stats SA's new price basket is launched, despite electricity price hikes by municipalities over the rest of the year. 
> 
> This is because the new basket will have a smaller weighting for food, fuel and power - all high-inflation items - and because next year's inflation will be measured off a high base.


*Cough* Wasn't the levels last year a high base compared to the previous year too?  :Whistling:

----------


## Dave A

On the flip side of high bases...



> South African new vehicle sales fell 18,1% in September compared with the same month last year, and were likely to stay under pressure through to the end of the year, partly because of high interest rates. 
> 
> The National Association of Automobile Manufacturers (Naamsa) said on Thursday new vehicle sales were down at 40 955 units from 49 996 in September 2007. The September 2007 figure was depressed by a strike in the automotive component sector that affected production and sales.
> 
> Including sales from Associated Motor Holdings, whose data is presented separately as it does not fulfil all of Naamsa's reporting requirements, total sales fell to 44 725 vehicles in September from 55 645 last year.
> full story from M&G here


I've skipped posting the numbers for a couple of months - they've all been going the wrong way so is it news, really?

On the plus side, we've got a new basket coming that might bring some good cheer on the CPIX side next year. Then we had the load shedding for the first part of this year. That should give a nice low base for year-on-year comparisons somewhere along the line.

I'm not sure we're at "the bottom" just yet, but if you're making it at the moment, hang in there. There's a fair chance light at the end of the tunnel could start showing soon.

----------


## Karenwhe

I have noticed quite a few vehicle dealership closing down in prominent areas are that have been around for many years.

But I don't understand, is that as fast as the those close, I see new BMW and other brand name dealerships being built from ground up in places like Beyers Naude.

----------


## Morticia

Leftovers from the 7 fat years - the funds have been in their budgets for a few years.  However, now it's back to the drawing boards for the next 7 lean years...

----------


## Dave A

> However, now it's back to the drawing boards for the next 7 lean years...


Hopefully not *that* long  :EEK!:

----------


## Chatmaster

Just heard over the radio that Ford are looking at retrenching some of their workforce. It seems they are in negotiations with the unions about it.

----------


## Dave A

I think UIF is going to get hammered. There has to be serious pressure for lay-offs in a number of sectors. I wonder how healthy the fund reserves are?

----------


## Morticia

Ford has been in trouble for a number of years and not only in SA. I think only inebriated judges can afford to drive Jaguars lately.........

----------


## Erika Gordon

We have a looming energy hike of 24.8% and municipalities signalled their intentions to hike their fees. Please note the term "looming" because the municipalities will only hike their electricity supply costs from July.  With electricity and petrol price hikes, both input costs, inflation will also go north and Bobs your uncle.  Interest rates will go north.  
What does this mean?  Businesses will have to rework their business models to either save costs, increase revenue or increase something else.  All of this with a global recession and a lucrative world come that may not realize for the massess.

And oh yes, our property sector will see a shift.

It will hurt!!!

----------

