ECONOMIC WEEK AHEAD: Will SA escape recession in third quarter?
Stats SA will release third-quarter GDP figures. Other figures for the quarter have far shown that SA has clawed its way out of recession
The latest GDP figures will overshadow much of the other data expected this week because they will reveal whether SA has emerged from recession.
On Tuesday, Stats SA will release third-quarter GDP figures. Other figures for the quarter have so far shown that SA has clawed its way out of recession. While production figures were lower than expected, economists are confident that it is enough to see slight growth.
The Bloomberg consensus is 1.9%. However, the expected growth number would not alter full-year GDP forecasts as the year-on-year numbers remained exceptionally weak, warned FNB chief economist Mamello Matikinca.
GDP contracted in the first and second quarters, placing the economy in recession for the first time since the global financial crisis. Economists define a recession as two successive quarters of GDP decline. In the second quarter growth contracted 0.7%, after a steep 2.6% drop in the first quarter.
"September activity data released has been pretty downbeat. But conditions still seem to have improved in recent months, supporting our view that the economy returned to growth in the third quarter," said Capital Economics economist John Ashbourne.
The lift in the third-quarter growth figures was expected to have been underpinned by positive growth in the manufacturing and trade sectors, said Investec economist Kamilla Kaplan. In contrast, the primary sector of the economy is expected to have underperformed.
Despite this, growth is expected to remain meagre for the year. The National Treasury expects benign growth of 0.7%, while the Reserve Bank expects 0.6% this year.
On Monday, Absa will release its monthly purchasing managers index, which gauges activity in the manufacturing sector. The index has been below the key 50-point mark (a reading of greater than 50 suggests expansion) for eight months running. “Challenging demand conditions both abroad and domestically are serving to constrain actual production,” said Kaplan.
The Absa manufacturing purchasing managers index worsened to 42.4 points in October, which bodes ill for the sector in the fourth quarter. “Lacklustre domestic demand and a lack of export competitiveness will likely keep the index subdued over the medium term,” said Matikinca.
Monday will also see the release of the vehicle sales figures for November. October vehicle sales surprised to the upside, largely due to a higher volumes of commercial vehicles being shifted. According to the National Association of Automobile Manufacturers of SA, aggregate new-vehicle sales growth is projected to be relatively flat in 2018 as a whole, at 558,000 units versus 557,707 units in 2017.
On Thursday, the Reserve Bank will release third-quarter current account figures. SA’s current account deficit narrowed in line with expectations in the second quarter of 2018 to 3.3% of GDP, from 4.6% in the previous quarter.
Matikinca expects the current account deficit to widen slightly. “While exports haven't performed poorly, imports have maintained,” she said.