ECONOMIC WEEK AHEAD: Fuel price set to rise as data releases loom
SA’s foreign exchange and gold reserves, as well as car sales numbers, will provide important economic clues, writes Andrew Linder
This week sees the first data releases for a year bound to be another challenging one for consumers. Having just endured a large fuel price increase, according to data released by the Central Energy Fund on Friday, another hefty one can be expected in early February.
Already, the underrecovery on petrol is 56c-57c a litre, while that on diesel is 44c-45c and illuminating paraffin 42c.
The increases follow those in the price of Brent crude, which gained nearly 6% in November and 10% in December. The rises came as Organisation of the Petroleum Exporting Countries and some non-Opec members, such as Russia, decided to cut global production to boost prices.
Most analysts believe Brent will average about $60 a barrel in 2017, from about $56 at present. Any weakness in the rand, however, will add to fuel price pressure.
Monday sees the release of SA’s foreign exchange and gold reserves, which dropped by a substantial $805m in November to $47bn.
The slump came due to a fall in the gold price and dollar strength, with the US currency having risen further still on the increased likelihood of a number of interest-rate increases there in 2017.
Monday also sees the release of December’s vehicle sales. In November, new-car sales fell by an annual 13.8%, while for the first 11 months of 2016 sales of all vehicles dropped 11% compared to the previous corresponding period.
After the November release the National Association of Automobile Manufacturers of SA (Naamsa) said the short-to medium-term outlook for sales was "extremely challenging".
"Double-digit new-vehicle price inflation, pressure on household disposable incomes, low levels of consumer and business confidence and relatively high interest rates represented a negative environment for new-vehicle sales," Naamsa said.
One reason for optimism, Naamsa said, was an increase in the Reserve Bank’s leading indicator, which had risen for two consecutive months "suggesting the possibility of a modest improvement in the economy over the next 12 to 18 months". It said growth of 1% in real terms might see new-vehicle sales rise 3% to 4% in 2017. Other analysts, however, were less optimistic.
The South African Chamber of Commerce and Industry puts out its December business confidence index on Wednesday, while November’s manufacturing production and sales data from Statistics SA are expected on Thursday.
The October number showed a decrease of 2.7% year on year, as sales of food and beverages, and motor vehicles, parts and accessories saw fairly big declines.
Trading Economics is forecasting an annual drop of 0.42% in November, while the Bloomberg consensus is for growth of 0.3%.
Barclays releases its December manufacturing purchasing managers index on Thursday, with Trading Economics forecasting an increase to 49.27 points from November’s 48.3.
A reading that is above 50 signals an improvement in business conditions.