ECONOMIC WEEK AHEAD: Labour survey likely to show drop in jobless rate
Quarterly employment gains due to seasonal hiring will be temporary, economist warns
After enduring a recession during the first half of 2018, the economy ended the year firmer with an expected moderation in the jobless rate among improvement in key economic indicators to be released this week.
Unemployment is forecast to have declined due to seasonal hiring in the services sector in the fourth quarter of 2018. Stats SA will publish the Quarterly Labour Force Survey on Tuesday.
Investec expects unemployment to moderate to 27.1% from 27.5% previously. However, Investec economist Kamilla Kaplan said the gains were temporary. “This hiring is typically reversed in the following quarter,” she said.
FNB chief economist Mamello Matikinca-Ngwenya said the bank expected “the outcome to reflect continued pressure in the SA labour market”.
Manufacturing production is also forecast to have grown in December. The most recent Absa purchasing manufacturing index indicated better demand conditions, which suggests that the adverse impact of load shedding late in 2018 was limited, Matikinca-Ngwenya said.
Nedbank is expecting production growth of 1.8% year on year in December from 1.6% previously. But operating conditions in the sector are expected to remain challenging in 2019. Slowing global growth and unresolved trade disputes continue to overshadow growth prospects for the sector.
Retail sales growth is forecast to have moderated to 2% in December from 3.1% year on year in November. November sales rose from the previous month due to Black Friday and Cyber Monday discounts. This subsequently dampened December sales.
Kaplan said several major retailers recently reported weak trading sales updates. The seasonally adjusted measure, which is used to calculate GDP, is likely to signal that the retail sector made a positive and possibly larger contribution to the fourth quarter GDP than in the third quarter of 2018, she added.
Retail, manufacturing and mining production data are usually a gauge for determining the health of the economy. While growth in the other two sectors has firmed, mining is expected to reflect a decline in the three-month rolling seasonally adjusted measure. Investec forecasts a decline of 1.5%.
“Commodity price developments, the domestic policy and legislative environment, as well as administered price movements, will be important determinants of the performance of the mining sector in the year ahead,” Kaplan said.
FNB forecast positive mining data, supported by a very weak base in December 2017, when the sector reported a contraction of 0.8% year on year. Matikinca-Ngwenya said the strike by the Association of Mineworkers and Construction Union at Sibanye-Stillwater’s gold operations, combined with adverse effects of Transnet’s derailed 200-wagon project, will have affected mining growth.
The SA Chamber of Commerce and Industry trade conditions survey for January 2019 will be released on Wednesday.