ECONOMIC WEEK AHEAD: Economists expect rebound in mining and manufacturing
Mining and manufacturing are poised to report a strong recovery for January 2018. But growth in the coming months may be tricky as uncertainty over the dollar and China’s economic expansion clouds the outlook for commodity prices, a key factor for the performance of both industries.
Domestically, new Mineral Resources Minister Gwede Mantashe’s success in undoing policy bottlenecks that continue to crimp investment and activity in the sector will be key to it growth, said BNP Paribas economist Jeffrey Schultz.
"While a rebound in the year-on-year growth rate in mining production is probably likely in January, the bigger picture for the mining industry remains challenging." The stronger currency in recent months had lowered the rand gold price considerably and resulted in many large gold miners to be loss-making.
Investec’s house view is that mining has grown at 5% year on year in January from December’s 0.1% year on year. "Lower statistical base factors in January 2017 account for some of the forecast lift," Investec economist Laura Hodes said.
However, FNB chief economist Mamello Matikinca said: "We think any meaningful bounce-back in January is unlikely given the strengthening of the currency and several mine stoppages which could have affected production volumes."
Statistics SA will publish mining production and sales data on Wednesday.
Manufacturing is expected to continue its stronger recovery. BNP Paribas’ house view is of 2.8% year on year growth for manufacturing production in January from 2% in December. This follows a lift in key purchasing managers’ indices in January and February and was also boosted by still positive annualised growth in exports, Schultz said.
The Bloomberg survey of economists also reflects a consensus of 2.8% growth for January while Investec predicted 2.5%.
Industry body The Manufacturing Circle is itself predicting better prospects and will on Monday publish results of its fourth quarter investment tracker, which will indicate a rise in investment in the industry. Official manufacturing data will be released on Tuesday.
Jana van Deventer, head of financial markets at ETM Analytics, said a recovery in global commodity prices that began in 2016 had lost some momentum and commodities are increasingly sensitive to developments with the dollar. "We still don’t think its a very synchronised upswing that’s happening, just a mild improvement in economic activity. Whether or not this will be sufficiently strong to prop up commodity prices is up for debate."
Risks to economic growth in China were also tilted to the downside and loss of momentum in that economy typically had a knock-on effect on commodity prices, she said.
Other data to be released include the Bureau for Economic Research business confidence index for the first quarter of 2018, which is sponsored by Rand Merchant Bank. The forecast is for an improvement to 51 from 34 previously. This indicates expansion. The index has languished below the 50 neutral mark for the past 12 consecutive quarters. The index will be published on Wednesday, the same day that the South African Chamber of Commerce releases its trade conditions survey for February.
Statistics for civil cases of debt and selected building statistics will be released on Thursday.
Schultz said consumers were in "better shape" following tighter credit conditions and a lower inflationary environment, which had improved disposable income. The latest national credit statistics show that the number of consumer accounts with impaired records and those accounts that are three months or more in arrears have declined. "This we believe should keep a tight lid on growth in the number of civil cases for debt," he said.