ECONOMIC WEEK AHEAD: Damage from Eskom’s blackouts in focus

The extent of damage severe load-shedding has had on the energy-intensive mining and manufacturing sectors during December will be in focus in the week ahead. 

Manufacturing and mining data from that month are due on Tuesday and Thursday, respectively, while retail sales numbers are due on Wednesday.

Economic data out this week is likely to be dismal, said independent economist Elize Kruger, adding to fears that SA entered a recession in the fourth quarter.

“Ongoing concerns regarding US import tariffs on the steel and aluminium sectors, high electricity prices, hefty wage demands and the return of load-shedding are all headwinds that will continue to strain the mining sector,” she said.

Mining is expected to contract 3.5% year on year, according to a Bloomberg consensus, after a 3.1% fall in November.

Eskom instituted stage 6 load-shedding for the first time on December 9, and numerous miners were forced to suspend underground operations temporarily.

Along with the electricity disruptions, a generally subdued economic environment probably also took its toll, said Investec economist Kamilla Kaplan, who expects a 1.5% decline in that month.

The mining and manufacturing sectors are likely to have weighed on GDP in the fourth quarter of 2019, said Kaplan.

“Heading in 2020, a meaningful growth recovery in both sectors will be inhibited by domestic factors linked to infrastructure challenges, perceived policy uncertainty and depressed business confidence,” Kaplan said.

SA’s manufacturing sector is expected to have fared even worse, down an annualised 4%.

Retail sales numbers for the last month of 2019 are due on Wednesday and are expected to show a 2.1% rise year on year. December is a key month for retailers, as consumers usually pick up their spending during the festive period, when many receive a 13th cheque.

Retail sales are expected to rise by an annualised 2.1% in December, with FNB chief economist Mamello Matikinca-Ngwenya saying that consumers probably held back on spending ahead of the season, pointing to a rebound from 0.4% growth in November.

Stats SA’s Quarterly Labour Force Survey (QLFS) for the fourth quarter of 2019 is due on Tuesday and is likely to show that unemployment remained unsustainably high, said Matikinca-Ngwenya.

The third quarter of 2019 saw the highest unemployment rate for SA in the history of the QLFS. The rate increased 0.1 of a percentage point to 29.1% during the third quarter of 2019. The expanded unemployment rate, which includes discouraged job seekers, was 38.5%. 

gernetzkyk@businesslive.co.za