Economic Market Report - September 2023

Smart Money Moves
4 October 2023
5 min read

South Africa

Stats SA released the Q2 2023 economic growth rate on September 5, 2023. The report indicated that the economy grew by 0.6% in Q2, which was an improvement compared to the 0.4% growth in real GDP during the previous quarter (Q1 2023).

On the production side of the economy, six industries showed growth from Q1 2023 to Q2 2023. Notable improvements were seen in the manufacturing industry, which grew by 2.2% and contributed 0.3% to GDP growth. The finance sector also saw a 0.7% increase, adding 0.2% to GDP growth. Agriculture performed exceptionally well with a growth rate of 4.2%, contributing 0.1% to GDP growth. Additionally, the personal services sector advanced by 0.7%.

On the expenditure side, the primary concern was household final consumption expenditure, which decreased by 0.3% in Q2 2023, contributing 0.2% to overall economic growth. On the other hand, the government sector increased its final consumption expenditure by 1.7%, contributing 0.3% to economic growth.

A surprising development was the growth of fixed capital formation (investment), which increased by 3.9%. This growth was attributed to reduced power outages and private sector investments in alternative energy.

However, net exports had a negative impact on total growth due to logistical issues at South African harbours. Exports increased by 0.9%, but imports grew by 3.3%.

In terms of monetary policy, the South African Reserve Bank kept its key repo rate unchanged at 8.25% during its July 2023 meeting, ending a streak of ten consecutive rate hikes. The Governor emphasised that this decision did not signify the end of the tightening cycle and that future rate adjustments would depend on inflation. In July 2023, the inflation rate dropped to a two-year low of 4.7%, down from 5.4% in June, and below market expectations of 5%.

The Rand exchange rate was a notable concern, having depreciated by 166 cents against the US dollar since the previous MPC meeting, reaching R19.20/$ by September 6, 2023. South Africa's retail trade continued to struggle, with a 0.9% year-on-year decline in June 2023, marking the seventh consecutive month of poor performance, mainly due to high interest rates and challenging economic conditions.


Many experts believe that the U.S. Federal Reserve won’t raise interest rates again soon, mainly due to the recent job report indicating a rise in the unemployment rate to 3.8% and slower wage growth in August.

The chances of the Fed increasing interest rates further this year, as reflected in the U.S. futures markets, have dropped to around 38%, down from 45% before the latest jobs report. The financial markets are now eagerly awaiting the Fed's decision at its upcoming meeting on September 19. The Fed's goal is to achieve a durable 2.0% inflation rate and a 6.2% unemployment rate.

Despite rising prices and borrowing costs, retail sales in the U.S. increased by 0.7% in July 2023, surpassing expectations for a 0.4% increase. This positive trend in consumer spending suggests that the U.S. economy is unlikely to enter a recession this year. More economists, including those within the Federal Reserve, are now predicting that the U.S. will avoid a recession. However, it may not be until 2024 that we can be sure.


According to a report from The Economist at Swiss Re Institute, they anticipate that the European Central Bank (ECB) will raise interest rates two more times due to ongoing high core inflation and wage growth. They also predict that the Bank of England (BoE) will increase its repo rate by another 75-basis points after a 50-basis point hike in August.

Other studies suggest that there is still a significant amount of monetary tightening in the Eurozone. Most forecasts for Euro area GDP growth in 2024 are now lower at 0.4%, down from the previous consensus of 1.0%. However, the outlook for the UK has improved, with a 0.4% increase in the consensus forecast for 2023 GDP growth, now at 0.1%.

Many analysts believe that the tightening of monetary and lending conditions will start affecting economic activity more in the second half of this year and in 2024. This comes even as real household incomes begin to recover from disinflation. It's important to note that the full impact of the rapid monetary policy tightening has yet to be fully realised.

Emerging Markets

According to the latest IMF report from July 2023, emerging and developing Asia is expected to experience a growth rate of 5.3% in 2023, which will then slightly decrease to 5.0% in 2024, marking a small 0.1% decrease for 2024.

China’s growth forecast remains unchanged at 5.2% for 2023 and 4.5% for 2024. India is projected to have a growth rate of 6.1% in 2023, which is 0.2% higher than the April projection. This increase is mainly due to stronger domestic investment in the fourth quarter of 2022.

Emerging and developing Europe is expected to see growth rise to 1.8% in 2023, reflecting a 0.6% upward revision since April, and then increase further to 2.2% in 2024.

In Latin America and the Caribbean, there is an anticipated decline in growth from 3.9% in 2022 to 1.9% in 2023, which is a 0.3% upward revision compared to the IMF's April forecast.


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