It turns out that the Q1 contraction in the South African economy coincided with a contraction in the economy of the United States. Who could have foreseen that? The US contraction has been blamed on foul weather.

What to make of this seemingly unrelated contraction in both economies? The jury will probably be out for a while on what this portends.

There had been an indication that the US economy was healthy and doing better than the general world economy. The contraction has seemingly been a bolt from the blue.

One thing, though. A contraction in SA is clearly problematic for the local economy. A US contraction could be a blessing or a curse, depending on the response of the Fed (and the SARB). Halting or even reversing tapering would affect the SA economy positively, but the contraction could also spook investors. We also wait to see the movement of the US$. Unfortunately, movements either up or down can both be a blessing and a curse for the SA economy.

One hopes the SARB has a nimble strategy in place to deal with either eventuality.