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April 2022 economic review

May Economic Overview
| Market Forces


Following a disappointing first quarter for global markets, the month of April proved no different. Most global markets ended in the “red”, including South Africa on the back of myriad factors which all weighed on sentiment and left investors rattled. Such factors include the ongoing Russian invasion of Ukraine and inflationary pressures, particularly in the US. Furthermore, the strict movement restrictions in parts of China to curb recent COVID-19 infections raised supply chain shortage concerns.

US inflation continues to soar and GDP shrinks

US consumer inflation rose to 8.5% y/y in March, its highest level since January 1981. Core CPI, excluding food and energy prices, also rose to 6.5% y/y in March. US inflation m/m was up 1.2%, its biggest increase since September 2005. Noticeably, energy prices increased 32% for the month.

US real GDP contracted in the first quarter of 2022 at an annual rate of 1.4%, well below market forecasts of a 1.1% expansion. The US economy was negatively affected by the resurgence in COVID-19 cases due to the Omicron variant earlier in the year and a reduction in retailers’ inventory purchases. This contraction is also the first since the COVID-19 induced recession in April 2020.

The US added 431 000 payrolls in March, below expectations of 490 000, indicating tightening conditions in the labour market. However, the unemployment rate fell for the second consecutive month to 3.6% in March.

Chinese authorities attempt to contain COVID-19 outbreak

Shanghai, one of China’s most populous cities, recorded the highest number of new COVID-19 cases since the start of the pandemic. Shanghai spent all of April in full lockdown, denting market sentiment further. Officials rolled out repeated rounds of mass testing, part of the country’s zero-COVID strategy. The People’s Bank of China (PBoC) cut reserve requirements for banks and vowed to increase support for the economy, despite ongoing restrictions.

China’s official manufacturing purchasing managers index (PMI) contracted to 47.4 in April (49.5 in March), its second consecutive month of contraction.

UK’s GDP growth forecasts revised while inflation soars

The UK is showing signs of a slowdown due to reduced household spending and investments as a result of higher prices and interest rates. This led to the International Monetary Fund (IMF) cutting the UK’s GDP growth forecast to 3.7% for 2022, down from January’s forecast of 4.7%.

The GfK Consumer Confidence indicator in the UK fell to its lowest level since July 2008, and well below market consensus of -33 in April. The collapse in consumer confidence indicates that the rise in the cost of living is beginning to weigh on growth. It’s important to note such levels are consistent with a recession.

Inflation in the UK jumped to a three-decade high of 7% y/y in March. It’s now largely expected for the Bank of England (BOE) to raise rates for the fourth consecutive time at its next meeting.


The fighting in the eastern and southern parts of Ukraine intensified during the month. The impact on energy markets remains notable given the difficulties faced by Europe in reducing its energy dependency on Russia. As a result, April eurozone inflation reached 7.5% y/y.

Labour markets continue to impress, with unemployment rates in the eurozone close to multi-decade lows. However, despite strong wage growth, consumer confidence in the eurozone has tumbled to levels similar to the UK.

In other news, Emmanuel Macron was re-elected for a second five-year term as French president. While the margin of victory was narrower than the previous election, the result had little impact on financial markets given that it was largely as predicted by polls.

South Africa

The country was forced to declare a state of disaster as a result of one of Kwa-Zulu Natal’s worst natural disasters, with heavy rains causing uncontrollable flooding. The disaster caused around 500 deaths, destroyed more than 5 000 homes and caused extensive damage to infrastructure. The economic damage could not have come at a worse time since the local economy is just starting to recover from the social unrest of July 2021. To add to domestic woes, Eskom implemented rolling blackouts during the month and warned citizens the country could experience more than 100 days of load shedding this year.

In local economic data, March annual headline inflation measured by the consumer price index (CPI) came in at 5.9% y/y, compared to 5.7% y/y in February. The rising prices managed to remain within the South African Reserve Bank (SARB) target band of 3-6% y/y. According to Statistics SA the key driver was the transport component, unsurprisingly raised by the elevated oil price stemming from the Russian invasion of Ukraine.

Retail sales data disappointed, as February retail sales fell 0.9% y/y and marked its first negative print in five months. Rising interest rates and elevated inflation weighing down on consumer spending.

Interesting headlines over the month

Billionaire entrepreneur Elon Musk bought Twitter for $54.20 per share, totaling around $44 billion and counting as one of the biggest leveraged buyouts in history. Elon stated, “freedom of speech is the cornerstone of his vision.”

Despite risk appetite diminishing across global markets, according to Bloomberg Warren Buffett has been doubling down on a tried-and-trusted strategy to navigate the fallout. The billionaire investor went on his biggest stock buying spree for at least a decade, making $41 billion in net stock purchases in the first quarter of 2022.

In the cryptocurrency world, the Central African Republic (CAR) declared Bitcoin as an official currency, the second country in the world to do so. CAR is following the lead of El Salvador, which introduced the cryptocurrency as a legal tender in September last year. A government spokesman said the move is designed to attract investors and ease money transfers.

Global markets

Developed equity markets had a miserable month. The MSCI World Index returned -8.43% in USD and -0.89% in ZAR. In USD terms, this also marked its worst month of a bad year thus far. US equities struggled. The S&P 500 was down 8.72% m/m, its worst month since March 2020. US tech shares were amongst April’s biggest losers, with the tech-heavy Nasdaq 100 index (around -13% m/m) experiencing its worst monthly drawdown since 2008. European equities fared better than US counterparts, despite April concluding with no signs of a resolution to the war in Ukraine. The Euro Stoxx 50 (€) returned -2.00% m/m. The UK’S blue-chip FTSE (£) surprised on the upside, closing 0.31% m/m.

Emerging equity markets fared slightly better than developed counterparts, with the MSCI Emerging Market Index closing down 5.75% in USD and 2.02% up in ZAR. Chinese equities experienced a late-month rally as the government pledged support for economic growth, which has been hampered by severe lockdowns related to China’s “Zero-COVID” policy. Despite the April drop, the Brazilian and South African equity markets remain the only two global markets in positive territory year to date, measured in USD.

Local markets

The South African equity market followed global markets, ending the month in negative territory for the first time in seven months. The FTSE/JSE All Share Index closed down 3.66% m/m. The local bourse was red across the board.

All major indices recorded losses. Financials plummeted 3.42% m/m as banks and insurance companies were amongst April’s worst-performing stocks. Miners have been a key driver of local market performance but were generally weaker during the month as production reports disappointed, with Resources returning -5.39% m/m. Industrials, which have lagged other sectors this year, was the best performing sector in April, at -1.80% m/m. Local bonds sold off sharply, with the All Bond Index (ALBI) returning -1.67% m/m. SA listed property struggled, at -1.41% m/m. Cash (STeFI) delivered a moderate return of 0.36% m/m. South African value managers (-2.96% m/m) outperformed growth managers (-4.38% m/m) once again, consistent with what is occurring globally as interest rates remain the key theme across key countries.

The ZAR experienced another rollercoaster of a month, dropping to its weakest level in close to five months as expectations of a 50 basis-point hike by the Fed kept the USD elevated, with the ZAR losing as much as 7.61% m/m against the USD. The ZAR also lost 3.11% and 2.56% m/m against the pound and euro respectively. On a positive note, the ZAR gained 6.74% m/m against the Japanese yen.

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