Trade Deficit widens, Rand on new Low to Dollar

South Africa’s trade deficit widened in October to the biggest gap since January as imports of machinery, vehicles and oil climbed. The rand weakened to an all-time low.

The trade shortfall increased to ZAR 21.4bn (US$ 1.5bn) from a revised ZAR 1.3bn in September, the South African Revenue Service stated yesterday. The median of 12 economist estimates compiled by Bloomberg was for a gap of ZAR 7.8bn. The deficit for the first 10 months of the year was ZAR 59.4bn compared with ZAR 95.1bn in 2014.

The gap on the trade account will keep pressure on the current account, the broadest measure of trade in goods and services, and the rand, which fell to a record against the dollar after the data was released. The benefit to exports of the currency’s 20% drop against the dollar in 2015 is partly offset by falling metal prices, low global demand and power shortages in Africa’s most-industrialised economy.

“There is still little to show that a weaker currency is helping our export market, and it also reflects the weak demand conditions in our key trading partner countries, like China,” Jeffrey Schultz, an economist at BNP Paribas Securities South Africa, said. “I wouldn’t expect a trade deficit of this magnitude to sustain over the medium term given the weakness in the domestic demand environment, which I think inevitably will keep a lid on imports.” The current-account shortfall eased to 3.1% of gross domestic product in the three months through June, the lowest in almost four years, from 4.7% in the previous quarter. The Reserve Bank will publish current-account data for the third quarter on December 7.

The rand weakened 0.2% to ZAR 14.44 per dollar after reaching ZAR 14.47/US$ earlier. The yield on rand-denominated government bonds due December 2016 rose eight basis points to 8.63%.

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