According to Google, at the time of writing, there were 743m searches for the word ‘inflation’, 316m for ‘recession’, and 160m for ‘soft-landing’. These numbers indicate how top-of-mind these indicators are and how they have dominated the economic narrative this past quarter.

The South African economy performed better than expected so far this year with real GDP growing by a seasonally adjusted 1,9% quarter-on-quarter in Q1 2022, up from 1,4% in Q4 2022. This increase was driven by continued growth in consumer spending and by government expenditure, complemented by an encouraging acceleration in fixed investment. Should domestic demand remain buoyant and consumer spending and fixed investment resilient, it is possible that the economy could expand by more than 2% in 2022. Headwinds to this outlook such as regular load shedding, weaker global demand, rising domestic energy and food costs lifting inflation, and higher interest rates are a concern. Inflation breached the upper end of the Reserve Bank’s target range in May due to higher food and fuel prices and as a result, the MPC is likely to tighten interest rates further. This will hurt discretionary income and persuade households to be more cautious about spending on non-essential goods and services. SA CPI inflation is expected to average 6.5% for 2022, while a prime lending rate of 9.25% is forecast at the end of the year.

Economic conditions globally deteriorated in the first half of 2022. The Russian invasion of Ukraine pushed international energy, food, and other commodity prices sharply higher, adding to global inflationary pressures. China locked down some of its cities to combat an outbreak of COVID-19. The two-month restrictions negatively impacted the production and supply of goods to its trading partners exacerbating the already constrained global supply chain. In advanced countries, inflation increased to around 40-year highs, forcing the Federal Reserve in the US and other major central banks to tighten monetary policy much more aggressively than previously expected. Given the multiple headwinds facing the world economy, the World Bank revised its global growth forecast for 2022 down from 4,1% to 2.9%. Global risk appetites are likely to remain subdued and markets volatile because of slowing growth and higher inflation, unsettled by growing fears of stagflation and the increased threat of recession. Investors should brace themselves for more volatile markets in the second half of the year.


Matt Maher said “In order to move forward you need to look back.” At Autus Fund Managers, you can be sure that we understand the importance of doing both.