ECONOMIC WEEK AHEAD: SA’s mining and manufacturing data in focus
Numbers are expected to reflect SA’s deteriorating economic prospects, though the coronavirus could steal focus
Data this week will give an indication of SA’s first-quarter economic performance, with analysts expecting further contraction in the energy-intensive mining and manufacturing sectors during January.
SA’s manufacturing sector is likely to come under particular pressure, with data on Thursday expected to show an annualised 5.1% contraction in the first month of 2020, which follows a 1% fall in December.
The numbers for the first month of the first quarter come after data last week showed that SA slipped into a technical recession in the last quarter of 2019.
SA’s mining sector is expected to grow 1.2% year on year in January but fall 0.5% compared with December, according to the Bloomberg consensus. In January 2019 SA’s gold miners were under pressure from a strike by the Association of Mineworkers and Construction Union (Amcu).
FNB chief economist Mamello Matikinca-Ngwenya expects mining to show a year-on-year decline in January, even though gold production surged in December, albeit off a low base.
“The combination of intermittent power outages, the dissipation of favourable base effects and the spread of the coronavirus in China likely adversely affecting export prospects are among the main factors informing our expectation of a January downturn,” FNB said.
Business confidence index
The RMB/BER business confidence index (BCI) for the first quarter is due on Wednesday, with the consensus that the index fell to 24 points from 26 points in the fourth quarter.
The gauge is expected to remain at depressed levels due to recessionary conditions in the economy, the prospect of load-shedding continuing into 2021, ongoing policy uncertainty and the perceived slow progress of structural reforms, said Investec economist Kamilla Kaplan. “Low levels of business confidence will continue to manifest in subdued private investment and job creation rates,” she said.
Confidence picked up in the fourth quarter of 2019, but after the index plunged to a 20-year low in the third, which surpassed the negative sentiment expressed at the time of the 2008 global financial crisis.
Last week the SA Chamber of Commerce and Industry (Sacci) BCI rose marginally in February to 92.7.
The coronavirus outbreak may steal focus from economic data in the week ahead, however, as the worsening outbreak prompts further revisions of both SA’s and the globe’s economic prospects in 2020.
On Friday Moody’s Investors Service cut its expectations of SA’s growth due to the viral outbreak. Moody’s — the last credit ratings agency to hold SA debt at above junk status — lowered its growth forecast for SA to 0.4% from 0.7%, as it revised down its expectations across the Group of 20 (G20) countries.
Weakness in SA’s mining and manufacturing sectors is expected to continue into January, according to Capital Economics emerging-markets economist Virág Fórizs. The Reserve Bank is expected to cut the repo rate by 25 basis points in both March and May, Fórizs said.