In June 2012 South Africa’s trade balance recorded another deficit of R5.7bn, compared with a deficit of R8.9bn in May 2012. This was slightly less than market expectations, although the survey was based on a very small sample size. This is South Africa’s sixth consecutive monthly trade deficit. In first six months of 2012 SA’s trade balance has recorded a cumulative deficit of R51.0bn, well in excess of the R2.5bn trade deficit recorded during the first six months of 2011.
During the month, the value of exports fell by 1.7%m/m to R61.7bn (down R1.01 billion in the month). Imports, however, also fell during the month, down 6.0%m/m or R4.3bn. The decrease in imports included a substantial decline in minerals (oil), which fell 11%m/m or R2.1bn. On the export side, the fall was almost exclusively in the minerals category (eg coal) which fell by 13%m/m or R2.3bn. This was partially offset by a welcome 15%m/m increase (R0.8bn) in vehicle exports. In the first six months of 2012 exports have risen by only 6.7%y/y in value terms, while imports have increased by 21.4%y/y.
The sub-components of SA trade data remain extremely volatile month-by-month, and therefore difficult to interpret. However, on a trend basis, the trade balance has moved from a reasonable surplus in 2010/2011 to an increasingly significant deficit in 2012. In general, South Africa’s exports are under increasing pressure, reflecting the sluggish global economic environment, especially the return to recession conditions in the Euro-area (see chart attached). This will add to the pressure on the current deficit, which has already widened to a deficit of 4.9% of GDP in Q1 2012.
Looking forward, the sluggish nature of the world economy (including the recent fall-off in global commodity prices, the recession in Europe and the economic slowdown in Asia), suggests that South Africa is going to struggle to maintain export performance; despite the somewhat weaker Rand. Additionally, SA import intensity (see chart attached) is also likely to continue to rise as domestic expenditure grows (albeit modestly); especially if there is a pick-up in fixed investment activity into 2013/2014. This implies that the trade balance could be under further pressure over the coming 12 to 24 months.
Download the presentation slides