April’s activity data hinted at an uptick in South Africa’s economy, but we believe that thecontinent’s most developed economy will continue to face significant headwinds over the comingmonths. Growth in Q1 fell to just 1.3% q/q saar, and the economy was driven almost entirely byconsumer spending. But with inflation rising and interest rates set to be hiked in July, we doubt thatthis is sustainable. Optimism regarding the narrowing current account deficit is also misplaced; thesmaller-than-expected Q1 deficit was entirely the result of volatile investment income flows. Thetrade shortfall actually widened. And more economic disruptions may be on the cards as thecountry prepares for the next round of wage negotiations in the restive mining sector.
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