ECONOMIC WEEK AHEAD: Slew of data to reveal extent of recovery
A host of important economic data due out this week, including the private sector’s appetite for credit, new cars and other imports, will help reveal whether SA’s economic recovery is gaining momentum.
The first notable release, on Wednesday, will be private sector credit extension (PSCE) figures for April. These will provide some insight as to whether growing consumer confidence is translating into actual demand for credit. If so, greater consumer spending should follow, which would bode well for GDP growth.
So far in 2018, a more favourable economic environment, including higher confidence levels as a result of greater political and policy certainty, has aided private sector lending growth, notes Investec economist Laura Hodes. She is expecting PSCE to have risen to 6.01% year on year in April, up from 5.9% in March and 5.7% in February.
First National Bank chief economist Mamello Matikinca also expects PSCE to post another mild acceleration as demand from corporates and households continues to pick up in line with improved confidence levels.
Producer inflation for April will be released on Thursday. It will be scrutinised for the extent to which manufacturers have passed through the one percentage point increase in value-added tax, which took effect on April 1. The fact that April’s consumer price index came in under expectations suggests that manufacturers have not yet fully incorporated the VAT hike, Matikinca says.
Even so, FNB expects the April producer price index to have climbed back above 4% year on year after dipping to just 3.7% in March.
Investec expects producer inflation to have hit 4.2% in April. It notes that fuel price pressure, in the form of a 72c/l increase in the price of petrol, coupled with the additional taxes announced in the 2018 budget, will have weighed on production costs.
SA’s trade balance for April will be also be released on Thursday and is likely to yield another small surplus after the R9.5bn registered in March.
On Friday, Absa’s manufacturing purchasing managers’ index (PMI) for May will be released. In April, the PMI moved convincingly into positive territory, climbing four index points to 50.9 from 46.9 in March, buoyed by a recovery in new sales orders.
Hodes explains that since orders are now outstripping inventory levels, manufacturing output should continue to climb. She is optimistic that the PMI could reach 51.5 in April. However, Matikinca expects the PMI to hold steady around 50.
Vehicle sales for May will be released on Friday. The National Association of Automobile Manufacturers has forecast annual domestic sales growth of 3%-plus in 2018, based on the expectation that there will be a continued recovery in domestic demand and moderation in new-vehicle price inflation.
Also due out this week are liquidations and insolvency numbers for April on Monday and March tourism and migration figures on Tuesday.