
06 Jan 2025
Macro-economic outlook: US in focus, while medical authorities’ concerns over HM
The new year has started with market focus on the US, with President-elect, Donald Trump, set to take office on 20th January. Financial market indicators have seen some weakness into 2025, with US interest rate cut expectations falling.
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Inflation expectations were revised significantly higher for the US this year on the incoming Trump administration, with two interest rate cuts factored out of US market expectations (of -25bp each), and the rand consequently losing around R1/USD.
Markets will remain focussed on US inflation outcomes to inform interest rate expectations, and so some market volatility is expected, as incoming tariffs in the US on imported goods are anticipated to increase inflationary pressures.
US inflation is still above the 2.0% y/y implicit target, and the Federal Reserve Bank expects it to rise above its previous forecast, to 2.5% y/y this year from 2.1% y/y, while it has also revised GDP growth higher for the US, to 2.1% y/y for this year.
With a downward revision to 2025’s unemployment rate as well, to 4.3% y/y from 4.4% y/y, expectations for the performance of the US economy have improved after the US election, with the Trump administration expected to strengthen growth.
The resulting US dollar strength has been the key driver of the rand’s weakness over the past few weeks, with the domestic currency remaining volatile. The rand has been more stable against the crosses which should limit the inflationary effect.
South Africa started the year with a low inflation environment (the latest print is at 2.9% y/y) but is expected to see inflation climb modestly over 2025, on base effects after dropping sharply over 2024, while rand weakness adds pressure.
Data for 2024 to date show a 0.8% y/y GDP growth outcome for GDP, although Q3.24 is likely to be revised higher, resulting in an outcome closer to 1.0% y/y while South Africa is expected to see economic growth of 1.8% y/y for 2025.
Transnet’s freight incapacity remains a very substantial limitation on economic growth, without which the economy could expand to at least 4.0% y/y. Transnet’s recapacitation at will take several years, with GDP over 3.0% y/y likely only by 2030.


Concerns have also arisen for the outlook around global growth, which is expected to slow this year on increased tariffs in the US, while fewer US interest rate cuts and US dollar strength, with China particularly impacted.
The negative impact is also expected to extend to less portfolio inflows into EMs (emerging markets) from a higher US interest rate environment than anticipated, with China being particularly impacted the most by reduced flows.
Recently, China has seen a surge in the HMPV or Human metapneumoniavirus, with children, the immunocompromised and the elderly particularly affected by the respiratory symptoms and seeing higher fatalities.
With the virus having been around since 2001, and concentrated in the colder seasons, China’s centre for disease control (CDC) has said “(r)espiratory infections tend to peak during the winter season,” discounting a pandemic like COVID-19.
Adding, “the diseases appear to be less severe and spread with a smaller scale compared to the previous year.” The rise in case detection is also being attributed to new technology, while caution on disease outbreaks is heightened since COVID-19.
The symptoms of HMPV are recorded as similar to influenza or a cold but can lead to bronchitis or pneumonia among the susceptible. There is no vaccine currently, but HMPV is not a new disease with many already having some immunity.
In contrast, COVID-19 was a new disease at its outbreak without a level of immunity in the global population, as there is with HMPV from prior infections. Authorities in general are not fearing a pandemic, and the WHO has not declared a global outbreak.
With lockdowns and other harsh restrictions not expected, masks, good hygiene and staying at home when ill are recommended. Cases are being recorded outside China as well, but again severe alarms are not being raised by health authorities.
Returning to South Africa productive factors, and economic growth in particular, a more rapid resolution of Transnet and other structural constraints on the economy would see economic growth accelerate much more rapidly.




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