Emerging South

South Africa is flooded by poor economic data. First, South Africa’s purchasing managers index plummeted to a record low of 39.2 points in February 2009.
Secondly, a disastrous month for the motor manufacturing industry as February new passenger vehicle sales plummet further. The industry is on the brink of collapse and is hoping for R10bn from government to keep it going.
And the thirdly – a disappointing January 2009 trade deficit has sent the rand into freefall against the Euro and dollar.  This is in sharp contrast with Brazil posting a trade surplus in February. 
This means inflation will go up again in South Africa, which will firther weaken the Rand.  I have been warning for more than a year now how South Africa's trade deficit is a serious problem. Customs and Excise reported the January 2009 number at R17.380bn – the weakest on record – and a fair margin worse than the previous R14.7bn ‘low’ recorded in October 2007.

With this new inflationary pressure, you can expect that there will be no immediate further rate cuts in South Africa.  The South African prime rate is still 14,00% !!  Meanwhile in Brazil, the comparable SELIC rate which is at 12,75% will highly probable be dropped to 11,75% this week.  More importantly is that in Brazil the spread charged by the banks is also going down; I'll write on this later this week.