ECONOMIC WEEK AHEAD: Few bright spots to lift the economy
Key data are likely to reflect global and domestic slowdowns
Economists are braced for a slew of uninspiring economic data as global growth continues to slow and SA’s domestic recovery struggles to find momentum.
First up on Tuesday will be the SA Reserve Bank leading indicator for December. The indicator has been on a downward spiral since July 2018, last registering a 0.1% year-on-year decline in November.
“We expect another dreary reading in the December print, which will continue to be reflective of a challenging economic environment,” says First National Bank chief economist Mamello Matikinca.
SA’s January trade balance will be released on Wednesday.
Investec economist Kamilla Kaplan is forecasting a sizeable deficit of R14.2bn. She says a deficit is typically incurred in January as companies look to replenish inventory levels after the festive season, while exports typically decline.
Since 2011 the January trade balance has consistently recorded a deficit. However, the significant decline in international oil prices at the start of the year will likely contain the import bill and moderate the deficit compared to previous years, says Matikinca.
As global trade continues to lose momentum, SA’s export growth is in danger of slowing substantially in the year ahead, warns Kaplan. This, coupled with relatively weak domestic demand conditions, suggests there is unlikely to be much improvement in the Absa manufacturing purchasing managers’ index (PMI) due out on Friday.
The PMI lifted a whisker above the neutral level to 50.7 in December 2018 before dropping back to 49.9 in January. The impact of load shedding and ongoing economic weakness suggests that the February figure will decline further below the 50-point level.
Private-sector credit extension (PSCE) figures for February will be released on Wednesday.
“The rate of growth in household credit is likely to remain moderate due to high unemployment, slow wage growth and a higher cost of living,” says Kaplan.
However, she expects statistical base effects to lift corporate credit growth, resulting in an overall increase in PSCE of 5.8% year on year in January 2019 compared to 5.1% year on year in December 2018.
Producer price inflation (PPI), which is due out on Thursday, is likely to have fallen further in January on slower manufactured food prices, the continued moderation in international oil prices, as well as a stronger rand.
After printing in excess of 6% year on year since July 2018, the PPI eased to 5.2% year on year in December 2018 as fuel prices tumbled.
New-vehicle sales for February will come out on Friday.
Matikinca expects another negative reading, after the 7.4% year-on-year contraction in January, as consumers continue to hold back on purchases of big-ticket items because of economic uncertainty.
Passenger vehicle sales, which make up 70% of total sales, have been particularly weak as consumer affordability remains constrained by high unemployment, weaker income growth and fragile consumer credit health, adds Kaplan.
Commercial-vehicle sales will also remain under pressure as long as rates of fixed investment remain stagnant.