During September, the external trade surplus continued August’s upwards move and expanded to a 6-month high that seems to be rather encouraging at first glance. Detailed data, notwithstanding, show some fragility in such a conclusion. September’s pick-up is greatly based on a USD 2.4bn increase in exports (especially in oil and oil products as well as still strong gas exports), fully offsetting a simultaneous advance in imports (on machinery). Given that the abnormally warm November will likely contain Europe’s demand for Russian gas, we would treat October’s improvement in trade surplus as temporary, but contracted imports (according to preliminary non-CIS imports data) might help. Hence, we suggest that September’s tick up in trade surplus is not sustainable and will not translate into further expansion in November.
The general trend remains the same, in our view: the SA external trade surplus has continued expanding since May 2013 owing to contracting SA imports and levelling off SA exports, despite September’s increase in both SA imports and exports. We maintain our estimate that until oil drops (our baseline scenario), the SA trade balance will not narrow, as imports will be limited by weaker local demand amid worsening labour market conditions, decelerating retail lending and slower growth in wages.