SOUTH AFRICA: ANC To Propose Reduced VAT Hike As Cabinet Meets For Budget Talks
Mar-03 07:38
- The African National Congress (ANC) will propose a downsized 0.75pp VAT hike during today's Cabinet meeting and ask the Democratic Alliance (DA) to consider it, or else it would enter talks with the opposition Economic Freedom Fighters (EFF), the Sunday Times reported. While the plan to moot a smaller VAT increase was mentioned last week, the ANC appears to be ready to take a more assertive posture. Separately, the Congress of South African Trade Unions (COSATU) proposed a pension contributions holiday as a way to plug the fiscal hole. The Cabinet will hold its second special meeting to iron out differences on the delayed budget later today, after it resolved a week ago to put together a team led by Deputy President Paul Mashatile and task it with preparing a report on available options ahead of the revised March 12 budget deadline.
- South African Reserve Bank (SARB) Governor Lesetja Kganyago said that a review of the central bank's inflation target is still on the table, even as it was not mentioned in the initial version of the 2025 Budget. The Governor said that he was waiting for the outcome of a review by the National Treasury and would not take any unilateral action.
- Eskom said that it was forced to shut down unit 2 of the Koeberg nuclear plant after an unplanned, non-technical trip during ongoing works on unit 1, which remains offline. The unit was expected to return online within 48 hours and did not necessitate the implementation of loadshedding. Koeberg power plant contributes around 5% of national power supply.
- The US's top diplomatic envoy in South Africa stepped down and will be replaced by another diplomat on March 14, according to a Bloomberg report. One of Charge d'Affairs Dana Brown's last tasks in office was representing the US at the summit of G20 Foreign Ministers in Johannesburg, which was snubbed by Secretary of State Marco Rubio.
- Absa Manufacturing PMI will be published at 09:00GMT/11:00SAST.
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FED: Powell To Deliver Semi-Annual Testimony In Mid-Feb
Jan-31 21:48
The House Financial Services Committee's website confirms that Fed Chair Powell will deliver his semi-annual Monetary Policy Report on Wednesday Feb 12 at 1000ET.
- The Semi-annual testimony will be closely eyed as Powell's first scheduled appearance since the January FOMC - and the House testimony on the 12th is the same day as the release of January CPI (and the week after nonfarm payrolls and benchmark revisions) so will be of particular interest.
US OUTLOOK/OPINION: Nonfarm Payrolls, Revisions Highlight Next Week In US Macro
Jan-31 21:39
Friday’s nonfarm payrolls for January highlights the US macro week. It's a highly anticipated report that could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- The preliminary estimate for the benchmark revision pointed to the level of payrolls being some 818k lower than currently reported for back in March 2024. There’s a broad expectation from what we can gather that the hit seen next week won’t be as large but it could still be significant. We also watch the seasonal revisions closely, as whilst they should have a zero-sum impact over the calendar year, we’ve noted some particularly favorable seasonal factors in recent months that have biased seasonally adjusted jobs growth higher.
- With these considerations in mind, the early days of the Bloomberg consensus points to nonfarm payrolls growth of 150k after a solid three-month average of 170k. Note that the unemployment rate from the separate household survey won’t be affected by these revisions, having already seen its own seasonal factor revisions last month. A population control will complicate month-on-month changes in the levels of employment and unemployment but shouldn’t be significant for the rate, which is seen unchanged at 4.1% having surprised lower with 4.09% in December. The recent high is technically 4.23% in November having first popped to 4.22% back in July.
- Two other special mentions for the week are: 1) rare remarks from FOMC Vice Chair Jefferson speaking on the economic outlook and monetary policy late on Tuesday with both text and Q&A, having last spoke on Oct 9. 2) ISM services on Wednesday after its priced paid series jumped 5.9pts to 64.4 in December for the highest since Feb 2023.
- Away from macro but still material, the coming week brings the US Treasury's quarterly refunding process - our preview is here.
MACRO ANALYSIS: MNI US Macro Weekly: Uncertainty Vindicates Fed’s Patience
Jan-31 21:37
In a largely positive week for economic activity data, including in core durable goods and MNI Chicago PMI, the Q4 GDP accounts stood out by showing a very strong end to 2024 for the consumer.
- As we go to press, though, President Trump has confirmed that tariffs would be imposed on Canada, Mexico, and China beginning this weekend – while also threatening further action against the likes of the European Union and across various import categories.
- The combination of solid growth and policy uncertainty, along with stubborn “supercore” PCE inflation for December, seemingly vindicated the Federal Reserve’s “hawkish hold” at its January meeting.
- A March rate cut is still a possibility but the bar for such an outcome has been set high.
- That gets us to the first key release between now and then: Friday’s nonfarm payrolls for January is the highlight of the US macro week, and could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- Other highlights in the upcoming week include ISM Services and the Treasury’s quarterly Refunding announcement (Wednesday), while FOMC Vice Chair Jefferson delivers commentary on the economic outlook and monetary policy Tuesday.
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