South Africa’s trade surplus rose to R28.96 billion in February 2021, exceeding expectations and bolstering the Rand. Exports grew by 16.5%, mainly due to a 73% rise in the sales of vehicles and transport equipment. Meanwhile, imports only rose by 1.6%, leading to the widening surplus. The ABSA Manufacturing PMI rose from 53 last month to 57.4 in March, exceeding an expected rise to 55. Growth in vehicle sales of over 30% also reinforced the narrative of economic recovery and an uptick in spending.
Apart from positive local data, the Rand was further supported by global market optimism over the prospects of an economic bounce-back. Over in the US, strong employment data helped to highlight how the stimulus is boosting the US economy and influencing potential future GDP. On Friday, non-farm payrolls indicated that the US added a total of 916,000 new jobs in March 2021, smashing expectations of around 600,000 – 650,000 new jobs. The largest gain was in leisure and hospitality (280K) sector, followed by private education (190K). The US unemployment rate fell to 6%. The Rand closed the week at R14.67 against the greenback, after opening around the R15.00 mark.
The Sterling also had another respectable week in the markets, benefitting from prospects of a significant uptick in Q2 economic activity, as the UK is expected to outperform the majority of the G7. In the UK, over 30 million people have had their first dose of the vaccine and three million have had their second one. All of the region’s most vulnerable people have been offered the jab and the take-up has been better than expected. Lockdown restrictions are being eased slightly, with gatherings of up to six people now being allowed. Non-essential shops and hospitality sector business will be allowed to re-open on 12 April. The Rand ended the week around R20.25 against the Pound.
Combined with the easing of business restrictions and further progress in the vaccine rollout, market optimism has helped to boost risk-on sentiment support strong performance in the equity markets. The JSE rallied last week, with the prospects of higher potential GDP contributing to the bullish outlook. The Dow Jones advanced marginally during the week, while the S&P 500 advanced by 1.14% and touched 4000 for the first time.