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Moody rates positive
The rating agencies are still in the news today.
After the 'disappointing' ratings delivered by S&P and Fitch, another major ratings agency has come in with it's verdict on South Africa. Moody's one of the big player ratings agencies has not changed their credit outlook on South Africa and will hold their opinion at positive.
This story was covered in The Dispatch who interviewed an economist on what the ratings mean. He pointed out that the actual credit rating is not being changed, rather the 'outlook' has been changed which is a reflection of changing risk rather than fundamental credit problems. Fin24 interviewed the same economist and quoted him as saying that the downgrades were 'looking at the wrong curve at the wrong time'. Business Times also carried the I-Net bridge version of this story. The Times followed our economist of the day contributing that in the short term this will not affect the man in the street right now, but if our currency weakens to a point where interest rates might be raised then it is going to hit households much harder.
The Times ran a speculative story that there might however be an interest rate cut in December, which is way earlier than most commentators are calling it. They reckon that the G20 meetings will instil some kind of groupthink, making our policy makers risky shift into a policy change. This may happen it may not, the G20 is meeting and Livemint is having a bit of a 'back to the future' moment about the meeting comparing it to Bretton Woods.
If SA policy makers emerge from the meeting carrying a new global consensus with them it might be helpful for the financial system, but also unlikely given the complexity of the market, and ideological disagreement over what the correct course is.
Savings are extremely low in South Africa and this will put pressure on us if the effects of the financial crisis extend deeper down. Hayibo reports that 'Manuel urges SA to save a little bit of minus nothing'. This was a reaction to our 'negative' savings rate here in SA. Getting a savings account may be the quickest, simplest way, to improve your financial health.
In other news retailers are starting to feel the pressure as consumers cut back on spending, with retail sales dropping 5% year on year according to Business Day. This also raised speculation of an early rate cut to drive retail sales during the festive season.
And in a very brave statement brought to you by Business Day the chairman of one of the worlds most powerful banks, Citigroup, blames the crisis on...the banks, claiming that they got it wrong and they could get it wrong again.
At least someone is taking responsibility, even if there are no consequences for doing so.