It will be a quiet week on the local front, with no major data due for release. As a result, the local market is likely to take its cue from events in the US and Europe.
Building plans passed by municipalities in June, to be released on Wednesday, will give an indication how low interest rates and growing disposable incomes are contributing to the boom in property.
"Growth in new building plans passed has been exceptionally strong over the past few months, especially after sentiment in the property market was boosted by the surprise April rate cut," says JPMorgan economist Marisa Fassler.
Fassler says although a softening in the value of plans passed is expected in the figures, overall growth is likely to have remained strong compared with a year ago.
Building statistics for May will be released by Statistics SA, as will mining production figures, which were due out last week, for June.
Metals and minerals production in May rose 3,3% from a year earlier and gold production fell 8,1%.
"Mining production likely increased in June in response to the weaker rand and improving global demand," says Fassler.
Nongold production declined for two consecutive months between April and May, but is expected to have improved in June.
"Strike action in the gold mining sector over the past week is likely to have a negative impact on August's production numbers," Fassler says.
In the past fortnight, the domestic market has been flooded with data such as vehicle and retail sales that show business and consumer confidence is strong.
Inflation has remained within the Reserve Bank's target band of 3%-6% for 22 months running, but it is likely to tick up in coming months, analysts say.
This was a reason for the Bank?s decision last week to keep the repo rate unchanged at 7%, but some analysts see a further cut this year.
Next week sees more significant releases, including gross domestic product (GDP) figures for the second quarter of this year, as well as more inflation data.
This week, however, any data likely to move the local markets will come from overseas.
Consumer and producer inflation figures are due out in the US this week, tomorrow and Wednesday respectively, and these will be watched closely to see whether the Federal Reserve needs to start hiking rates more aggressively.
Policy makers in the US last week said they would raise rates at a "measured" pace after increasing the overnight bank-lending rate for a 10th time running to 3,5%.
"The numbers are expected to have increased in July from June and should justify the Fed's decision to keep raising rates," says Standard Bank economist Shireen Darmalingam.
Consumer inflation is expected to have risen to 3% last month, from 2,5% in June. Producer inflation is seen at 4% (3,6%).
Although the short-term outlook for the US economy is upbeat, in the long term concerns such as the rising trade deficit still linger, says Darmalingam.
High oil prices drove the US trade deficit 6,1% higher to $58,8-billion, on the back of record crude oil imports of $14,6-billion in June.
The widening could place further pressure on the dollar, which could in turn, boost the rand.
"The short term outlook for the rand remains bullish, shaped by the expectation of further dollar weakness," Darmalingam says.
Business Day
Publisher: Business Day
Source: Inet Bridge
