ECONOMIC WEEK AHEAD: Low growth set to weigh on inflation and jobs data
Strike at Sibanye-Stillwater and disruptions at a large iron ore producer are likely to affect the mining numbers, says economist
SA’s inflation and employment data will attract the most attention this week, with both expected to be lacklustre, in line with the prevailing low-growth environment.
Stats SA will release third-quarter employment statistics on Tuesday. The economy shed 69,000 non-farm jobs in the second quarter, a decrease in employment of 0.7% quarter to quarter. But the strong rebound in real GDP growth to 2.2% quarter to quarter in the third quarter fuels hope that employment growth might have ticked upwards.
Even so, any gains are likely to be muted, as business confidence surveys show most firms continue to experience downward pressure on their payrolls.
Also scheduled for release on Tuesday are mining and manufacturing production updates for October.
“The performance of both sectors has been affected by softening global economic activity and international trade tensions, reflected in both weaker demand and commodity prices,” said Investec economist Kamilla Kaplan.
Kaplan expects manufacturing production to have risen 1.3% year on year and mining production to have contracted 0.8% year on year in October.
Absa economist Peter Worthington says the strike at Sibanye-Stillwater, as well as disruptions at a large iron ore producer, will likely weigh on the mining numbers. He expects mining output to have declined 4.1% year on year in October, a larger contraction than the -1.8% year on year experienced in September.
As manufacturing activity has been highly volatile in 2018, output for October is harder to call.
Absa expects output to have expanded only slightly in November, by 0.2% month on month and 0.5% year on year.
Novare economic strategist Tumisho Grater expects manufacturing conditions to remain “challenging” due to weak domestic demand, rising costs and exchange rate volatility.
Consumer inflation for November will be released on Wednesday.
PNB Paribas economist Jeffrey Schultz expects the benign inflation picture to continue, with headline consumer price index (CPI) tracking sideways at 5.1% year on year in November. His forecast is underpinned by the expectation that food prices posted only a small gain, fuel prices remained flat and core inflation was contained.
Subsiding fuel-price pressures should contribute to an improved inflation profile in the months ahead. The CPI could drop as low as 4.5% in December, said Schultz.
“This, in our view, will lessen the chance of further monetary policy tightening at the January [monetary policy committee] decision,” he said.
Retail sales data for October will also be released on Wednesday. Only a small rebound is expected, as shoppers likely reined in spending ahead of the Black Friday specials in November.
Investec expects October retail sales to have risen 1.8% year on year compared with 0.7% year on year in September.
Producer inflation data for November, due on Thursday, is likely to have slowed or tracked sideways on October’s 6.9% year on year, given the lack of food, fuel price and demand pressures in the economy.