It seems like there is no stopping the ever rising rate of inflation in South Africa. At this rate one wonders even if the likes of Usain Bolt would even be able to catch up with the rate the way it is going. The increase in South Africa’s consumer price index excluding mortgage rate changes (CPIX) for metro and other areas, which is used by the South African Reserve Bank (SARB) for its inflation target, was up 13.0% year-on-year (y/y) in July from 11.6% y/y in June. This is the sixteenth month in a row that the CPIX has been outside the central bank’s target of having inflation being between 3 - 6%. Before the release of todays statistics, a survey carried out by I-Net Bridge had forecasted inflation to come in at 12.9%.

The question most of us will be asking now is, “Where to from here?” If the inflation rate continues to go up at this rate, the central bank is going to be forced to increase interest rates again. We were lucky the last time the MPC met and they decided not to change interest rates, but next time around we may not be so fortunate. It seems like unimaginable that the rate will drop down from 13% to the target of below 6%. If only the saying of ‘the higher you go, the harder you fall’ could hold with the rate of inflation, we would be happy. But as high as the rate is going, do not expect it to come down as fast. In that famous words of Tito Mboweni, “It is time to tighten up your belts!”

Now that the Olympic games in China are over, the next major sporting event in the world will be the FIFA World Cup in 2010 to be held here in South Africa. All eyes will be on South Africa, not only in the build up to the event but also after the event. A lot of money and resources are being put into this world show piece event. Some have said, too much money is being spent by the government for an event that will only last one month. A question you hear being banded around a lot these days is, “What will happen after 2010?”

Jason Simpkins from Money Morning takes a look at the China economy during the Olympics games below. Maybe we can see how the Olympics affected China and see if the same will happen in 2010 in South Africa : Read the rest of this entry »

Oil prices have plummeted 24% from the record high levels achieved in July, but the sell-off that sparked a stock-market rally over the last four weeks may not last since the Organization of Petroleum Exporting Countries (OPEC) is already gearing up to cut production.

OPEC, the cartel that controls roughly 40% of the world’s oil supply, pushed its production to the highest level in its 48-year history in July after being criticized for doing too little as the oil bull went on a year-long rampage – causing oil prices to reach an all-time high of $147.27 on July 11.

The production increase was led by Saudi Arabia, which – after a visit from U.S. President George W. Bush – boosted its production from 9.4 million barrels per day (bpd) to 9.7 million bpd, the highest level in 30 years. Higher production from Iran also helped push OPEC’s total output to 32.8 million bpd. Read the rest of this entry »

We all thought an inflation rate of 2.2m% was crazy, but today we have been shocked again. Zimbabwe’s annual inflation rate soared to 11.2 million percent in June, state media reported on Tuesday quoting figures from the central statistical agency. It gained 9 035 045.5 percentage points from the May rate of 2 233 713.4 percent. And yet again, these figures can not be very accurate and are probably understated. Is there really any point in continuing to calculate the rate of inflation in Zimbabwe? I think not. An inflation rate of 11.2m% just does not make much sense and it is really difficult for someone with no experience of the Zimbabwe economy to understand what such a high inflation rate means. Read the rest of this entry »

Today (Thursday 14 August), Reserve Bank governor, Tito Mboweni, announced that the Reserve Bank’s (SARB) Monetary Policy Committee (MPC) has decided to keep the repo rate at 12%. “The MPC has considered recent economic developments and the outlook for inflation and has concluded that, notwithstanding certain risks to future inflation outcomes, the current monetary policy stance is appropriate,” Mboweni said. This news comes as a huge relief to many who had feared that interest rates could go up again. But one should not be overly happy as the MPC will continue to monitor the situation and if need be, they will rise interest rates as they see fit. Read the rest of this entry »

We could be in for a huge petrol price drop in September. It is thought that the price of petrol could come down by as much as R1 a litre and R1.60 for diesel. That is if the world oil prices remain low and the rand remains strong. We will only know for certain come the 3rd of September as fuel prices come into effect on the first Wednesday of every month. Whilst most consumers will be happy if the prices go down by that much, fuel stations owners will not be too happy with this news.

Fuel station owners who bought fuel at the more expensive price will sell it at a loss as of the day of the change. On top of this, motorists will wait for the lower price before they fill up their vehicles. What this means is that, fuel stations could keep their supplies low until the Tuesday (2 September), or they might even allow supply to run out. Oil companies will then struggle on the Wednesday to meet the demand. Now if fuel stations do not want to stock up before the Tuesday that means there could be a potential shortage of fuel being sold by the fuel stations. Read the rest of this entry »

With sky-high growth potential, China and India are the two markets no investor can afford to miss out on. But that doesn’t mean they’re impervious to market turbulence, and in times of trouble, India is the more reliable investment.

No doubt, both countries’ markets are suffering this year, with China’s Shanghai A Index down 50%, and India’s Sensex Index down 25%. It’s no secret that India is struggling with both a growing budget deficit and mounting inflationary pressure. But China has problems too – it’s just hiding them under the carpet until the Olympics are over.

That’s why, for me at least, the investment decision is clear – I’ll buy the country whose problems are out in the open and already reflected in stock prices. Read the rest of this entry »