Presentation to the MPC, August 2004 NATIONAL ECONOMY Presentation to the MPC, August 2004 Research Department

NATIONAL ACCOUNTS

Real gross domestic product

Real final consumption expenditure by households

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.

Non-agricultural employment

Non-agricultural employment

ACB average salary/pension payment per recipient

Job advertisements in print media

Non-agricultural nominal remuneration per worker

Recent wage settlements

Non-agricultural labour productivity

Non-agricultural nominal unit labour cost

Overall inflation and CPIX

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

CPIX and administered prices excluding petrol

All-goods production prices

BALANCE OF PAYMENTS

Trade balance including and excluding extraordinary items

Trade balance including and excluding extraordinary items (continued)

Current account of the BoP

Ratio of current-account balance to gross domestic product

Financial account

Financial account (continued)

Balance of payments: Overall balance

Balance of payments: Overall balance

Effective exchange rates of the rand*

buoyantly rising domestic demand and positive wealth effects; and 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 Africa’s main export commodities; Source: SARB; Annual Economic Report 2004

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 & Poor’s and Fitch Ratings of South Africa’s 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

the successful bid for the 2010 soccer world cup during May 2004; and 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

Thank you