ECONOMIC WEEK AHEAD: Reweighted inflation data to make debut
Release of unemployment, consumer inflation and retail sales figures this week will likely show the South African economy is still struggling to gain ground
The unemployment figures, consumer inflation and retail sales data to be released this week are likely to be dismal, reinforcing the sense that the South African economy is battling to climb out of its current trough.
On Tuesday, Statistics SA will release its quarterly household Labour Force survey for the fourth quarter of 2016.
Economists are not expecting much deviation in the unemployment rate which rose to a record high of 27.1% in the third quarter of 2016 from 26.6% in the second quarter.
BNP Paribas Securities economist Jeffrey Schultz feels meaningful gains in the labour market are most unlikely given the persistent weakness in the economy, particularly in the manufacturing and mining sectors.
"There is likely, however, to have been a seasonal uptick in employment in the trade sector owing to spikes in temporary employment throughout the festive season in the retail and hotel and restaurant trade," he said.
On Wednesday, Stats SA will publish the consumer inflation rate for January calculated according to its reweighted and rebased consumer inflation basket.
This should be the highlight of the scheduled economic data releases this week.
Though there is a cautious expectation that the technical adjustments could mute the inflation data over the coming months, economists have warned that persistently high food and fuel inflation likely kept the headline figure elevated in January.
First National Bank (FNB) economist Mamello Matikinca expects the new weights to have contributed to a slight moderation in CPI in January but only to 6.7% from December’s 6.8%.
"While we expect a slight moderation in food prices, at 10.2% prices nonetheless remain high due to bread and cereals, fruit, sugar and other food prices which are still registering double-digit inflation," Matikinca said.
The Reserve Bank’s expectation is that the waning impact of the drought on food prices, coupled with statistical base effects, should cause inflation to fall back within the 3%-6% target band in the final quarter of the year.
Retail sales data for December will also be released on Wednesday but, with consumer confidence in tatters and household credit extension at record lows, there is scant expectation that the retail sector finished the year on a high note.
BNP Paribas Securities expects real headline retail sales to have slipped back into negative growth territory in December, falling to -0.3% year on year, following the surprisingly strong growth of 3.8% year on year recorded in November.
Investec economist Kamilla Kaplan, who expects retail sales growth of 0.9% year on year, said the November figure was boosted by Black Friday discounts that may have encouraged consumers to bring forward purchases ahead of the festive season. As such, she fears that December sales may have underperformed.
FNB expects retail sales to have remained flat in December on the continued moderation in household credit demand, sharp rise in headline inflation and elevated unemployment rate.