ECONOMIC WEEK AHEAD: Subdued business and consumer confidence in focus
Data about trade, manufacturing activity and new vehicle sales will be released this week
Figures about local trade, manufacturing sector activity, credit and vehicle sales are expected to shed light this week on SA’s third-quarter economic performance.
Overall, the figures are expected to be subdued, in line with data that has already shown lacklustre business and consumer confidence.
On Monday, the SA Revenue Service will release trade balance figures for August. The balance of trade indicates the difference in value between a country’s imports and exports and dictates SA’s current account, a measure of the country’s trade with the rest of the world.
SA recorded a surprise trade deficit of R2.88bn in July from an upwardly revised surplus of R5.5bn the previous month. It was SA’s first deficit in three months.
Data on Monday is also forecast to show that private sector credit extension increased 5.8% year on year in August, after a 7.19% rise in July, Investec economist Kamilla Kaplan said.
The rise would be mainly on higher base effects in the corporate credit category that will result in slower annual growth in corporate credit, Kaplan said.
“Overall, the rate of increase in credit extended to corporates is likely to remain restricted by weak economic activity and depressed business confidence,” she said.
“Similarly, household credit extension is expected to remain constrained by judicious lending criteria, high unemployment, relatively elevated consumer indebtedness and low consumer confidence,” Kaplan said.
On Tuesday, the Absa purchasing managers’ index (PMI), which gauges activity in the manufacturing sector, will be released. After jumping to a more than three-year high of 52.1 index points in July, the PMI declined to 45.7 index points in August, much worse than expected. The sector accounts for about 13% of GDP.
The PMI should come in at 46.5 points, Kaplan said, and at this forecast the PMI should average 48.1 in the third quarter as a whole, pointing to weak actual manufacturing production during the period.
This would corroborate the manufacturing survey of Absa and the Bureau for Economic Research at the University of Stellenbosch, which showed business confidence at a 20-year low, Kaplan said.
New-vehicle sales for September are expected to have underperformed because of continued pressure on SA consumers. The data will be released on Tuesday.
Consumers remain reluctant to purchase big-ticket items, amid subdued real disposable income, FNB chief economist Mamello Matikinca-Ngwenya said. “Accordingly, we expect another contraction in September, albeit at a softer pace relative to the August print,” she said.
In August, aggregate vehicle sales were down 5.1% year on year, while the new passenger car market registered a 7.6% decline.
Vehicle exports have remained healthy so far in 2019 and could add an element of cheer to the release. A total of 44,566 vehicles were exported in August, a 37.8% year-on-year increase. SA had exported 22% more cars in August 2019 compared with the same month in 2018.