In August this year, central bankers, finance ministers, academics and financial market participants gathered for the annual Economic Symposium in Jackson Hole in the US with the title "Fostering a Dynamic Global Economy". While analysts were hoping for some indication on the future of monetary policy in the Euro area, ECB President Mario Draghi didn’t provide any clues about intentions to cut back on the asset purchase programme.
Similarly, Federal Reserve Chair Janet Yellen did not provide insight into the direction of future monetary policy of the Federal Reserve; this is against a backdrop of low unemployment and low inflationary pressures. Real GDP in the United States, did however slightly surprise to the upside by reporting an annual increase of 3% in the second quarter of this year (up from the previous estimate of 2.6%).

This growth was supported by higher levels of consumer spending on goods and services as well as increases in business investment, exports, and federal government spending according to the Bureau of Economic Analysis.

The South African economy has seen GDP growth return to positive territory, recording annualised growth of 2.5% for the second quarter of 2017. Statistics SA noted that it is important to keep in mind that growth rates can be volatile, and further, that the 2.5% number is what the annual growth rate would be only if the observed quarterly rate were repeated for four consecutive quarters. CPI remained on a downward trajectory with the latest number for July reported as 4.6%, down from 5.1% in June. Both the Standard Bank and Absa purchasing managers indices also remain below the neutral 50-point mark indicating that growth in the manufacturing sector remains under pressure.

The headline Producer Price Index continued the downward trend that has been observed this year, with annual growth recorded as 3.6% in July (annualised growth at the beginning of the year was 5.9%). Private sector credit extension recorded the weakest growth in private credit since March this year at 5.7% year-on-year in July, down from 6.2% in June.

The expectation is for one rate cut before the end of 2017 given the current economic backdrop, with possible further monetary easing in 2018, should all else remain equal and a ratings downgrade not materialise in the medium term. Risks to the upside remain elevated, with continued uncertainty in the political climate and the possibility for policy shocks. This political landscape presents risks for rand weakness and inflationary pressures, which would place upward pressure on interest rates and see us return to an increasing interest rate environment. The fund is well positioned to take advantage of the current economic climate and uncertainties ahead.

The Nedgroup Investments Core Income Fund had a gross return of 0.71% for August 2017.

Taquanta Asset Management

In the US, the Federal Open Market Committee raised the target range for the federal funds rate to 0.50-0.75% from 0.25-0.50% in a unanimous decision due to expectations of further labour market strength and inflation. The Fed's tone was more hawkish indicating that they expect to tighten monetary policy at a faster pace in 2017 than they had forecast at their last meeting.

In the UK, CPI surprised on the upside to 1.2% year-on-year from 0.9% the previous month. Inflation is currently at a two-year high and the key upward drivers were a surge in import prices, higher prices of clothing, household goods and equipment, as well as rising fuel costs. UK input PPI (measuring change in the prices of materials and fuels bought by UK manufacturers for processing)remained high at 12.9% year on year, from 12.4% the previous month.

The growth outlook in the Eurozone is on a moderate pace as business investments picked up, supported by favourable financing conditions. Eurozone employment increased by 0.2% in the third quarter of 2016; this marks the highest number of employed people in the EU since the financial crisis in 2008. Locally in South Africa, the SARB's quarterly bulletin reflected a worsening current account deficit, subdued economic activity, weak employment creation, higher inflationary pressure, a sharply weaker rand, dismal trade gains as exports slumped, and a moderate under collection of tax. The current account deficit widened to 4.1% of GDP in the third quarter, from 2.9% in the previous quarter. South Africa's headline CPI inflation increased to 6.6% year-on-year from 6.4% the previous month.

On a month-on-month basis, CPI increased by 0.3%due to increases in transport inflation. Food price inflation remained in double digits in November (11.8% year-on-year, previously 12.0%). Core inflation remained unchanged at 5.7% year-on-year. Producer price inflation (PPI) for final manufacturing products increased to 6.9% year-on-year, slightly more than expectations, from 6.6% the previous month. Favourable weather conditions are expected in the near future and could see white and yellow maize harvests increase, which will moderate food price inflation and help to reduce CPI and PPI inflation going forward. South African private sector credit extension (PSCE) reduced even further in November.

PCSE slowed sharply to 4.6% year-on-year from 6.3% in October. It is the weakest since November 2010. Household lending is expected to remain subdued due to weak levels of consumer confidence and stricter lending criteria. Money supply (M3) also reduced to 4.67% year-on-year compared to 6.62% the previous month. The Nedgroup Investments Core Income Fund had a gross return of 0.73% for December 2016.