ECONOMIC WEEK AHEAD: Retail figures will indicate whether recession is over
Third-quarter data to be released on Wednesday form part of final GDP puzzle
This week will provide more insight into whether the South African economy has emerged from a recession.
The retail production figures, which form the final part of the GDP puzzle, will be released on Wednesday and will indicate how the economy performed in the third quarter.
GDP contracted in the first and second quarters, placing the economy in recession for the first time in almost a decade. Economists define a recession as two consecutive quarters of GDP decline.
While the economy is expected to have grown marginally in the third quarter, it remains too low to make a significant dent on unemployment, poverty and inequality. The economy has been struggling to breach the 2% mark for a decade while unemployment is inching closer to the 30% mark.
The Treasury and the Reserve Bank have slashed their growth forecasts in half to a meager 0.7% in 2018.
“Most recent statistics suggest that the economy probably returned to growth off a low base in the third quarter, but there are no compelling signs of significant underlying upward momentum yet,” said Nedbank economist Busisiwe Radebe.
The retail sector is a heavy hitter with consumer spending accounting for about 60% of GDP. In August, retail trade sales delivered relatively robust growth of 2.5% year-on-year.
“We expect a similar figure for the September number owing to relatively benign inflation, still accommodative monetary policy, and above-inflation wage growth particularly in the public sector,” said FNB chief economist Mamello Matikinca.
FNB projects that third quarter GDP growth will be around 2% “marking an exit from recession”.
Investec economist Lara Hodes said the figures will continue to reflect relatively muted consumption demand.
“Elevated debt to disposable-income levels, muted household credit extension, depressed sentiment and a mounting fuel price burden continue to put pressure on the already constrained consumer,” she said.
According to the Bureau for Economic Research’s latest retail survey, “business conditions in the retail sector remained constrained during the third quarter”.
Analysts said last week that a boost in the manufacturing sector will likely offset losses in the mining sector enough to lift SA out of a recession in the third quarter.
Average manufacturing output growth for the three months to end-September was 1.7%, helping offset a 2.2% decline in mining output.
The SA Chamber of Commerce and Industry trade conditions survey will also be released on Wednesday.
October’s survey showed that businesses confirmed trade conditions were negative and that the shorter-term six-month outlook remained tough.
On Thursday, there is a raft of second-tier September data points including civil cases for debt, wholesale and motor trade sales, and private sector building statistics.