Johannesburg - The rand weakened to an all-time low yesterday as South Africa’s trade deficit widened more than expected in October to its biggest in nine months.
The currency dropped as much as 0.4 percent to R14.4651 per dollar, reversing earlier gains, and was priced 0.35 percent firmer at R14.3555 as of 17.36pm yesterday.
The trade shortfall increased to R21.39 billion from a revised R1.26bn in September, according to figures released by SA Revenue Service yesterday.
Market expectation was for a shortfall of R7.8bn.
The deficit was due to exports of R86.35bn, down by 2.4 percent, and imports of R107.74bn, down by 2.3 percent.
October is seasonally a poor month as imports rise ahead of the festive season.
Nedbank economists Dennis Dykes and Isaac Matshego said the remaining two months would see a significant improvement but the underlying position remains difficult.
They said export volumes might improve in 2016 as the weakness of the rand lends some support.
“However, commodity-related prices will probably remain under pressure and external demand is unlikely to recover significantly.
On the import side, a lower oil import bill and weak consumer spending will help to offset subdued export growth to some extent.”
The cumulative deficit for the first 10 months of 2015 is R59.39bn, still much lower than the R95.14bn deficit recorded over the same period in 2014.
Exports of precious metals and stones, vegetable products, mineral products and vehicle and transport equipment fell significantly during October.
The benefit to exports of the currency’s decline is partly offset by falling metal prices, low global demand and power shortages.
The gap on the trade account will keep pressure on the current account, the broadest measure of trade in goods and services, and weigh on the rand if South Africa does not manage to attract more inflows to its stock and bond markets.
Meanwhile, South Africa recorded a narrower budget deficit of R 26.548bn in October, the seventh month of the 2015/16 financial year, compared with a R29.296bn shortfall for the same month a year ago, data from the National Treasury showed yesterday.
Economists’ estimates were for a budget deficit of R22.3bn.
Private sector credit extension showed a modest growth in October as retail banks reported some easing in lending standards.
Annabel Bishop, the chief economist at Investec, said households had seen a modest lift in credit growth to above 4 percent year on year since August compared with 4.5 percent year on year in October, from closer to 3.5 percent in the 12 months before, as retail banks reported some easing in lending standards on reduced credit losses.
* Additional reporting by Bloomberg and Reuters
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