Mamello Matikinca. Picture: SUPPLIED
Mamello Matikinca. Picture: SUPPLIED

A raft of important data releases are due this week, including the quarterly labour force survey, SA’s trade balance and the manufacturing purchasing managers’ index (PMI). All are likely to confirm weak economic activity during the second quarter.

First up on Monday is private sector credit extension (PSCE) for June. This slowed sharply in May to 4.5% year on year from 5.1% year on year in April. Though credit extension to both households and corporates has been lacklustre, May’s drop was driven by a R2bn drop in loans and advances to corporates.

"The weak economic growth backdrop … persistently depressed business confidence and declining investment rates have contributed to the dampened corporate demand for credit," explained Investec economist Lara Hodes.

She expects PSCE growth to remain muted at about 4.8% year on year in June.

Consumer lending

FNB chief economist Mamello Matikinca hopes for an uptick in lending to consumers on the back of better instalment credit growth, given passenger vehicle sales rose in June.

Statistics SA will release the second-quarter labour force survey on Tuesday. There is less expectation the unemployment rate will have lifted from 26.7% in the first quarter, given the subdued growth environment and lacklustre production updates from industry.

"It’s difficult to see where job growth would come from," said Matikinca. FNB expects agriculture, mining, manufacturing and construction to have reduced their headcounts during the quarter.

The trade balance for June will also be out on Tuesday.

June has typically been a good one for SA’s trade balance, delivering an average surplus of R6bn since 2010. A surplus of this magnitude would reduce SA’s year-to-date trade deficit to about R8bn, which would be mildly supportive of the rand.

Trade surplus

Investec anticipates a trade surplus of about R5bn, following May’s surplus of R3.5bn, based on a continued rise in exports coupled with a slowdown in import growth.

The weaker rand during June would have made imports more expensive and exports more competitive, but economists are hesitant to hope for too much from exports given the pervasive weakness in mining and manufacturing.

The July Absa manufacturing PMI will be out on Wednesday, as will new vehicle sales.

The PMI reading (47.9 in June) will provide insight into the health of the manufacturing sector at the start of the third quarter but SA is unlikely to have bucked the global trend of manufacturing weakness.

"Growing trade tensions globally and weak domestic demand are likely to keep the index in the doldrums over the medium term." said Matikinca.

The PMI survey is also likely to continue to reflect the cost burden on manufacturers associated with rand weakness, higher fuel prices and other administered overheads.

New car sales growth could moderate from the 3% year-on-year growth recorded in June as imported cost pressures, rising fuel costs and other consumer taxes begin to bite.

These pressures could be offset by better disposable income growth from above-inflation wage settlements, modest vehicle price inflation and generous discounts.