SA Trade Balance July 2010

In July 2010, South Africa’s trade balance recorded a surplus of R2.0bn. This was a little better than INET’s expectation for a small deficit of R0.8bn, and compares with a surplus of R5.6bn in June 2010.

During the month, imports rose by a fairly substantial 8.1%m/m, while exports were up 0.8%m/m, off a relatively high base given the disruptions caused by the Transnet strike earlier in Q2 2010. The rise in imports, which amounted to R4.0bn during the month, was mainly due to an increase in oil imports (R2.3bn). On the export side (which increased by a mere R0.5bn in July 2010), coal exports rose by R2.4bn, but this was mostly offset by a R1.9bn decrease in steel exports.

In the first seven months of 2010, SA imports were up 5.8%y/y or R18.4bn, while exports were up an encouraging 10.2% or R30.2bn, despite the strong Rand. The combination resulted in South Africa recording a trade deficit of only R6.6bn during the period January 2010 to July 2010. This compares with a deficit of R18.4bn during the corresponding period in 2009.

Looking forward (next few quarters), SA exports are likely to struggle to accelerate significantly given the still strong Rand and fairly modest world economic recovery. Fortunately, from a balance of payments perspective, import demand is expected to also remain modest given the still weak domestic economy. This implies that although the trade balance is likely to weaken during H2 2010/H1 2011, with SA running a more persistent trade deficit, the deterioration should be modest and manageable from a capital inflow perspective.

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