ECONOMIC WEEK AHEAD: Mixed forecasts for mining output growth
The rand — along with mining and manufacturing production and sales figures — will probably be one of the more closely watched aspects of economic data this week.
Emerging-market currencies including the rand came under pressure last week amid global concern about a brewing trade war between the US and China. The local currency touched its lowest level against the dollar in two weeks, breaking through the R12/$ mark on Friday.
A trade war could compromise improvements in global growth and demand for commodity exports, with knock-on effects for the mining and manufacturing sectors.
Economists are divided in their forecasts for production in these sectors in February. Official manufacturing statistics will be published on Tuesday and mining data will be released on Thursday.
Investec economist Lara Hodes, who is forecasting 3.2% year-on-year growth in February, said a dip in sales orders and business activity subindices of the Absa purchasing managers’ index (PMI) in March was worrying.
Makwe Masilela, chief investment officer at Makwe Fund Managers, expected 3.1% growth for manufacturing.
But FNB chief economist Mamello Matikinca said that despite a big positive jump in the Absa PMI FNB expected a less than significant acceleration as the market remained relatively subdued. FNB was also less optimistic on mining. Matikinca said gold and platinum group metals production had been "in the doldrums" and output was hampered by several mine stoppages. Platinum prices had continued to languish, while gold prices had risen on concern of a possible trade war.
But the stronger rand, until recently, was likely to offset some gains in the gold price. The headline mining number was likely to be supported by iron ore and coal production.
Masilela forecast a 2.9% increase and said: "One is expecting platinum group metals and gold to turn positive from the January negative as prices improved, and January was a short month as workers were coming back from December holidays."
Hodes expected 2.8% growth which would be supported by "the sustained, synchronised upswing in global activity and still elevated commodity prices.
Tumisho Grater, economic strategist at Novare, said policy stability in the mining sector was still necessary especially as the Department of Mineral Resources had not yet indicated if it would appeal against last week’s court ruling in favour of mining firms. The ruling implies that companies where black economic empowerment levels dipped to 26% after an offering did not need to top up again.
National gold and foreign exchange reserves for March will be published on Monday. Tuesday will bring the first Monetary Policy Review for 2018, which provides an outlook for the economy.
On Thursday, the South African Chamber of Commerce will publish the March trade conditions survey. In February, trade conditions improved but were affected by poor growth, profit margins under pressure and a stronger rand, which affected income from exports.