The South African rand strengthened against its US peer in the middle of the trading week as inflation and retail sales data came into focus. The rand has recorded a modest gain this year, joining the broader emerging market currencies that have witnessed growth in 2021. With the coronavirus pandemic subsiding, could Africa’s largest economy be on the rebound?
According to Statistics South Africa, the annual inflation rate rose 3.2% year-over-year in January, marking the seventh consecutive month of the consumer price index (CPI) trending above the 3% threshold. While it did match market expectations, it fell short of the central bank’s target range. The economy witnessed upward pressure in education, health care, and restaurants. But transportation and energy prices eased to kick off 2021.
The core inflation rate, which excludes food and energy, advanced at an annualized rate of 3.3%.
Retail sales suffered their ninth straight decline in December. The retail trade declined 1.3% year-over-year, but it was at the softest pace since the beginning of the COVID-19 public health crisis. Sales slumped for apparel, receipts increased for hardware, pharmaceuticals, and cosmetics.
On a monthly basis, retail sales slipped 0.8%.
On Thursday, building permits data for December will be released. In November, building permits soared 20.6%.
South Africa has witnessed a tremendous improvement in the fight against the highly infectious respiratory illness. Since the start of 2021, the seven-day average has plummeted from about 18,000 to a little more than 2,000. In total, the nation has reported 1.49 million total cases, with a death toll of roughly 48,000.
Many countries are beginning to report a new South Africa COVID-19 variant that has led to new cases in neighboring countries and around the world. But while the government has rolled out a vaccine program, there are concerns that the AstraZeneca inoculation does not work well against the virus. Officials went as far as suspending the vaccine over efficacy against the many variants. It is unclear what will happen to the roughly two million vaccines that the country was on target to receive.
The USD/ZAR currency pair tumbled 0.15% to 14.6382, from an opening of 14.6611, at 17:08 GMT on Wednesday. The EUR/ZAR dropped 0.68% to 17.6282, from an opening of 17.7460.