Economic Market Report - October 2023

Smart Money Moves
28 November 2023
5 min read

Global and South African stock prices faced continued pressure throughout October. However, a shift in sentiment occurred in the first week of November due to the Federal Reserve maintaining a more cautious stance on its bank rate and positive results from the US Non-Farm Payrolls report. The combination of lower international oil prices and a resilient US economy is now contributing to expectations of lower inflation and the potential end of the current interest rate increase.

In October 2023, the UN's Department of Economic and Social Affairs reported diverging economic activities among major economies. The United States defied predictions of a contraction, experiencing higher-than-expected growth in the first two quarters of 2023 despite active tightening of monetary policy since 2022. On the other hand, Germany entered a mild recession in the first quarter of 2023, and the overall growth performance of the euro area and the United Kingdom was weak. Economic growth prospects for China also remain subdued.

South Africa

The South African economy is slowly recovering, with the Minister of Finance stating in the Medium-Term Budget Policy Statement (MTBPS) that the treasury expects a 0.8% growth this year, aligning with the IMF's forecast of 0.9%. However, concerning aspects were highlighted in the MTBPS, indicating an increase in the budget deficit by R54.7 billion compared to February 2023 estimates. This results in a total deficit of almost 5.0% of GDP, higher than the budgeted 4.1% in February. Factors contributing to this include lower revenue from primary sectors, a rise in wage bill costs, and increased debt-service costs, now comprising 22.0% of total expenditure. As a consequence, total debt is projected to reach 77.0% of GDP, exceeding the 72% budgeted in February.

Inflation in South Africa reached 5.4% in September 2023, up from 4.8% in August. The Consumer Price Index (CPI) rose by 0.6% month-on-month in September. The main contributors to the annual inflation rate were food and non-alcoholic beverages, with an 8.1% year-on-year increase contributing 1.4 percentage points. Retail trade experienced a 0.5% decline in August 2023 compared to the previous year, marking the 9th consecutive month of decreases. On the other hand, manufacturing production in South Africa increased by 1.6% year-on-year in August 2023, marking the fifth consecutive month of growth in industrial activity.


The US economy, despite concerns about a contraction due to active monetary policy tightening since 2022, not only avoided a downturn but also exceeded growth projections in the first two quarters of 2023. The latest non-farm payrolls report for October, released on November 3, revealed a softer stance on interest rates from the Federal Reserve. The report showed that the US economy created 150,000 jobs, falling short of the expected 160,000, and the unemployment rate increased from 3.7% to 3.9% in September.

Despite the failure of two major US banks in the second quarter of 2023, there was no significant impact on the overall economy. The robust job market contributed to a 2.5% increase in real personal disposable income at the aggregate level, particularly benefiting low-wage earners. While the US labour market appears resilient, there are potential risks on the horizon. Household savings are decreasing, and elevated debt levels could eventually exert pressure on private consumption.


In contrast to the US, economic activity in European countries has generally been slow. Employment remains high, with the EU's employment rate for individuals aged 20 to 64 at 75.3% in the first quarter, exceeding 80% in Germany. Despite stagnation in the Czech Republic and a technical recession in Germany in the first quarter of 2023, their summer unemployment rates dropped to 3.4% and 3.0%, respectively. Even in traditionally high-unemployment countries like Greece, Italy, and Spain, there were short-term improvements.

However, there is a growing concern among investors that Europe may face a significant economic downturn, contrasting with the belief in financial markets that the US is headed for a "soft landing." Analysts attribute Europe's challenges in reducing inflation to the substantial impact of Russia's invasion of Ukraine on food and energy supplies.

In the UK, after modest growth in the second quarter, the economy likely stalled in the third quarter due to interest rate hikes and strikes. Based on available data, GDP grew 0.2% month on month in August, following a 0.6% decline in July. Inflation remained stable at 6.7% in September, slightly above market expectations and well above the Bank of England's 2.0% target rate.

Emerging Markets

The most recent economic analysis from Deloitte Global Economics Research Center reveals that emerging market economies are performing better than their developed counterparts. In August, the composite purchasing managers' index for emerging markets was at 52.7, indicating expansion, while the index for developed markets fell below the critical 50 threshold. In the first half of 2023, most emerging markets benefited from robust global demand and higher commodity prices. Some countries also gained from shifts in global supply chains as businesses sought to move manufacturing away from China. Notably, emerging market central banks have been more successful in controlling inflation compared to developed markets.

Looking ahead to 2023, the OECD predicts a 6% growth for India, 5.4% for China, and 4.7% for Indonesia, outpacing the global economy's expected growth of 2.7%. The positive outlook is attributed to factors such as declining energy prices, easing supply bottlenecks, the reopening of China's economy, robust employment, and resilient household finances, according to OECD Chief Economist Clare Lombardelli.


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