Some good news for consumers, Inflation came in at 12.4% in the month of October compared to its 13% level for September 2008. This could just signal that a rate cut may not be too far away. Inflation hit a peak of 13.6% in August but now it looks like it is starting to head towards the central banks target of having inflation being between 3 - 6%. But still this rate of 12.4% is relatively high but there is hope it can decline further in December and January when the fuel prices are expected to come down. So now it is just a matter of waiting to find out if the central bank decides to cut interest rates next month. That would surely be a great Christmas present for consumers in South Africa.

The head of Transnet, Maria Ramos is going to leave Transnet at the end of February next year and take over as the head of Absa, replacing Steve Booysen as chief executive. There is no doubting Ramos’ credentials. There are very few people available who could do a greater job than she has done. She took over at Transnet in 2003 and then it was making a loss of R6.3 billion but now Transnet has posted a profit of R4.3 billion. A great turnaround in such a short space of time. Of note in this transformation was Ramos’ decision to move ownership of loss-making SAA (South Africa Airways) back to the government and sell the Victoria & Alfred Waterfront property in Cape Town for $1 billion (R11 billion).
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The trend continues. New vehicle sales in South Africa dropped further in October, falling by more than 30% despite the month being a seasonally strong month. Sales fell across the board by 30.1%, or 16 426 units, to 54 569 units compared with the same month last year. Sales for the first ten months of the year are 19% lower than the same time last year. The main reasons for the continual decline in car sales is that the global economic crisis is hitting many consumers hard, even in South Africa. There is not a lot of confidence in the market at this moment in time and most would rather spend their money on other things than buy a new car. The prices of new cars are also increasing which is forcing consumers to put plans of purchasing a new car on hold.

Thoughts have to go out to the car dealerships all over the country. Just the other day I was driving down in Wynberg in Cape Town and saw a string of about 6 dealerships in a row all with brand new cars in the showrooms. There was no sign of any activity in the showrooms. A clear sign that not much business is taking place. For every day the car is sitting on the shop floor it means that no money is coming into the dealership but overheads still need to be paid.

Some relief for consumers in South Africa finally; The retail price of all grades of petrol will decrease by 45 cents a litre on Wednesday November 5 the department of minerals and energy announced on Friday. Diesel prices will also decrease, with 0.05% sulphur falling by 24 cents and 0.005% by 21 cents. Wholesale paraffin decreases by 39 cents and illuminating paraffin by 52 cents.

Petrol in Gauteng now costs 896 cents a litre from 941 cents before and it is now 872 cents at the coast from 917 cents before. This news is welcome by many who needed some relief as the prices of everything else seems to be increasing. The decrease in the price of fuel could have been more as the world oil prices have dropped considerably over the last couple of weeks. But at the same time, the rand has been loosing value against the US dollar so the decrease could have been greater if the rand had remained strong. But nonetheless we will be seeing a welcome decrease on Wednesday.

For the first time since September last year, the rate of inflation in South Africa has gone down. Statistics SA said growth in CPIX, which leaves out mortgage costs, slowed to 13,0% year-on-year last month (September) from an all-time high of 13,6% in August. This is an indication that price pressures are starting to ease.

Some analysts are thinking that inflation peaked at 13.6% and we should start to see it continue to drop over the next couple of months. But one thing to consider is the strength of the rand. If the rand continues to weaken it will put further pressure on inflation. The rand has shed about 35% versus the dollar since the start of the year. It traded at around R10,3350/$ in early trade, compared with R10,34 just before the data was issued. Inflation is expected to fall by about two percentage points in January next year when the consumer price index (CPI) is rebased and reweighted. The CPI replaces the CPIX as the targeted measure of inflation from next year.

With the expected lowering of the rate of inflation, does this mean we could be inline for interest rate cuts? Let’s hope so.

By 18:10 today, the rand was bid at R11.2763/$ from a previous close of R10.6550. It was bid at R14.4810/€ from a previous R13.8936 and at R18.2403/£ from R17.7622 before. Earlier in the day, the local currency hit the 11.2833 to the dollar mark, the worst level the rand has been in six-and-a-half years.

Why is the rand loosing so much value? According to analysts the local currency was being knocked by emerging market risk aversion as fears of a global recession continue to haunt international markets. Meanwhile, The International Monetary Fund (IMF) said today that the rand may be overvalued.

When most of us woke up this morning, we were shocked to find the rand trading at new record lows. The rand had slumped below the R10/$ mark over night but it recovered in early morning trade today to the R9.79/$ mark. But as the day went on the rand started to loose on those earlier gains. During the course of the day, the rand reached a six year worst level of R10.8615/$. At 17:15 the rand was bid at R10.4490/$ from a previous close of R10.6687. It was bid at R14.0065/€ from a previous R14.3728 and at R18.0200/£ from R18.2950 before. Earlier it touched intraday worst bids of R14.5359/€ and R18.7383/£.

With the falling rand it is very unlikely that we will see a fuel price drop in South Africa. World oil prices continue to drop; many had thought this would be good news as the price of fuel would also drop but no such luck due to the depreciating rand. Unaudited figures, up to October 16, indicate it was possible the price of petrol could be reduced by up to 29 cents next month, and diesel could go down 23 cents, but this looks more and more unlikely each day the rand continues to drop.