Rand softer after retail sales slow down

BONDS gained yesterday, driving yields to the lowest in a week, and the rand weakened after retail sales slowed in July, adding to evidence of an economic slowdown.

Yields on 6.75 percent bonds due March 2021 dropped. At 5pm, the rand was bid at R8.2541, 1.58c weaker than Tuesday’s bid of the same time.

Retail sales rose 4.2 percent from a year earlier, down from a revised 8.6 percent in June, Statistics SA said. Meanwhile, the median estimate in a Bloomberg survey of 11 economists was 7.2 percent. Consumer inflation accelerated in August for the first time in four months, reducing the central bank’s room to bolster growth by easing monetary policy.

“Domestic factors could lead to a reassessment of [local] risk and, therefore, potential downside for the local unit,” Ian Cruickshanks, the head of strategic research at Nedbank Group, and colleagues wrote in a report yesterday. “We are still forecasting some weakness over the coming months with increased volatility.”

Policymakers will keep the benchmark rate at 5 percent today, according to 19 of the 20 economists surveyed.

“The Reserve Bank now finds itself caught between weak economic growth performance and what appears likely to be moderately rising inflation,” Bruce Donald, an analyst at Standard Bank, wrote in e-mailed comments.