ECONOMIC WEEK AHEAD: Production data will give greater insight into SA’s economic trajectory
As SA comes to grips with news of the recession, data from the third quarter will provide some insight into the direction in which the economy is headed.
In the first host of data from the third quarter, SA will learn whether production in crucial sectors such as mining, manufacturing and retail has continued to wane.
Forward-looking data such as the Standard Bank purchasing managers’ index (PMI) and the Absa PMI have pointed to a weak third quarter.
On Monday the agribusiness confidence index will show the investment sentiments of agribusiness on the back of the land policy discussion.
The sector dragged down economic growth in the first and second quarters.
On Tuesday Stats SA will release the July manufacturing numbers. The July PMI survey suggested that manufacturing activity picked up slightly at the start of the third quarter, after detracting from growth in the second quarter of 2018.
"We don’t expect manufacturing output to have responded as enthusiastically," said First National Bank (FNB) chief economist Mamello Matikinca.
Retail sales will be released on Wednesday, while mining production is scheduled for release on Thursday.
The mining sector has come under increased pressure as policy certainty about the Mining Charter persists.
"Commodity prices have been under strain of late, amid geopolitical concerns and heightened trade tensions. This, coupled with a combination of other factors, including declining productivity and escalating costs, have suppressed activity in the mining sector," said Investec economist Lara Hodes.
July retail trade sales are likely to get a boost from the recently settled public sector wage increases at state-owned enterprises, said Matikinca. However, Hodes warned that consumer spending is still constrained and growth in the sector is likely to be muted.
Tuesday will also see the release of the third-quarter RMB/BER business confidence index. The confidence gauge slid to 39 in the second quarter from 45 in the first quarter.
Matikinca expects a material deterioration, saying the index is likely to fall to levels more reflective of the current economic gloom.
Hodes does not expect a recovery in the third quarter. "The economy is operating against a backdrop of swelling supply-driven inflationary pressures and muted activity, with the ongoing populist direction of some of SA’s actual and proposed economic policies continuing to weigh on sentiment," she said.
This comes in the same week that the Tax Indaba kicks off. Given the recent GDP figures and unfavourable statement from credit ratings agency Moody’s Investors Service, close attention will be paid to keynote addresses from finance minister Nhlanhla Nene and SA Revenue Service acting commissioner Mark Kingon on Monday.
Moody’s will host the Sub-Saharan Africa Summit on Thursday, which will provide insight into SA’s outlook.
The credit ratings agency slashed its growth forecast for SA in 2018 in half from 1.5% to 0.7% last week.