Import and export price growth compared to the Rand/Dollar
Date: 3 September 2018 Category: Economics |
Related Topics |
We take a look at the price movements of South Africa's import and export prices and compare it to the movements in the Rand/Dollar exchange rate over the same period of time. And the import and export prices shows price growth and movements that are far more subdued than the exchange rate.
|
Import prices vs Export prices vs Rand/Dollar Exchange Rate
The line charts below shows the year on year price movements in South Africa's Import and Export prices (as measured by Statistics South Africa's Unit Value Indices) as well as the Rand/Dollar exchange rate (as published by the South African Reserve Bank).
What is interesting to note about the graphic above is the large disparity in the movements during 2015 and 2016. The large peak in the blue line shows a strong weakening of the Rand/Dollar exchange rate with the Rand weakening almost 50% against the US dollar in early 2016 compared to the same levels a year before. Import and export prices did not see moves anywhere close to the movements in the exchange rate. One must admit it is rather odd that even though the exchange rate weakened considerably, the growth of say imported goods, was largely negative during that time period. Some might think it very odd. While it is odd, one of South Africa's biggest imports (crude oil) was declining during this period which meant the overall effect of the weaker exchange rate was nullified due to strong declines in oil prices during this time period.
From March 2018 to June 2018, Crude oil imports have made up on average 15.9% of South Africa's total imports.While on the export side, precious metals such as gold and platinum and stones (such as diamonds) made up roughly 20% of South Africa's exports during the same time period. Another big export Ores/slags/Ash aka Coal made up around 12% of South Africa's exports from March 2018 to June 2018.
Since roughly July 2017, the movement in the exchange rate, import and export prices have been very similar, with the decline in the blue line (a strengthening of the Rand against the US dollar) towards the end of 2017, being met with similar declines in export and import prices.
What the above shows is is that the overall pricing behaviour of goods being imported and exported out of South Africa is not nearly as volatile as the exchange rate, and one wonders whether importers and exporters comes to long term agreements with their offshore trading partners in order to minimise the effect of exchange rate movements on the value of goods being imported and exported.
From March 2018 to June 2018, Crude oil imports have made up on average 15.9% of South Africa's total imports.While on the export side, precious metals such as gold and platinum and stones (such as diamonds) made up roughly 20% of South Africa's exports during the same time period. Another big export Ores/slags/Ash aka Coal made up around 12% of South Africa's exports from March 2018 to June 2018.
Since roughly July 2017, the movement in the exchange rate, import and export prices have been very similar, with the decline in the blue line (a strengthening of the Rand against the US dollar) towards the end of 2017, being met with similar declines in export and import prices.
What the above shows is is that the overall pricing behaviour of goods being imported and exported out of South Africa is not nearly as volatile as the exchange rate, and one wonders whether importers and exporters comes to long term agreements with their offshore trading partners in order to minimise the effect of exchange rate movements on the value of goods being imported and exported.