Picture: ISTOCK
Picture: ISTOCK

The week will give a clearer indication whether SA will have another quarter of negative growth or narrowly escape a recession.

The mining figures and those on retail which Stats SA will release on Tuesday and Wednesday respectively will be the final pieces of the puzzle.

Analysts do not forecast a recession, but admit that the risk is high.

"Another GDP contraction in the second quarter is not our baseline case," said Absa economist Miyelani Maluleke.

Manufacturing data last week showed the sector again subtracted from GDP growth in the second quarter. But the contraction of 0.1% on overall GDP is small compared to the first quarter’s 6.4%.

"We continue to expect very weak GDP growth in the second quarter, but not quite a recession in the first half of the year on a recovery in retail sales, though the risk for recession is elevating," said Investec chief economist Annabel Bishop.

It is likely that gold output will again lead the sector lower, while coal production may also show a contraction given the recent wage impasse at Eskom, and resultant production losses
Mamello Matikinca
FNB chief economist

The mining sector has been constrained by policy uncertainty about the Mining Charter, expected to be finalised by the end of 2018. It has constrained investment in the sector. Production has contracted for three consecutive months.

June’s mining production is expected to continue its deterioration on the quarter, said Bishop.

"It is likely that gold output will again lead the sector lower, while coal production may also show a contraction given the recent wage impasse at Eskom, and resultant production losses," said FNB chief economist Mamello Matikinca.

"Iron ore output is also expected to show lower volumes as trade tariffs imposed on Chinese steel begin to bite, while a very weak base in PGM output in June 2017 should see it contribute positively to the outcome."

Retail sales are expected to remain in positive territory in the second quarter.

Consumer spending is expected to be supported by earlier rate cuts and improved confidence, said Nedbank economist Johannes Khosa.

"Although consumer activity has remained relatively subdued in recent months, the sector is not necessarily slipping back into an outright recession," said Stanlib chief economist Kevin Lings.

But Matikinca said she was concerned, considering the large increase in June 2017, which creates a high base from which to grow in June 2018.

On Thursday figures for June wholesale and motor sales, civil cases for debt and building activities will be published.

menons@businesslive.co.za


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