ECONOMIC WEEK AHEAD: Data will give a peek into effects of strict lockdown
Business confidence figures and data for mining and manufacturing production will take centre stage
As SA begins its second week at level 3 of the lockdown, a few of the delayed Stats SA data releases, postponed by the full restrictions on the economy through late March and all of April, will start trickling out.
Manufacturing data for March, and mining production figures for both March and April will give some of the first, though not complete, glimpses into the economy’s performance as it went into one of the harshest lockdowns imposed globally to slow the spread of the coronavirus.
Ahead of the Stats SA releases, business confidence figures from RMB and the Bureau for Economic Research (BER) will be released on Wednesday covering the second quarter of the year.
The RMB/BER business confidence index (BCI) is expected to worsen off record lows as firms grappled with the lockdown restrictions that set in on March 27.
The first-quarter BCI print came in at 18 index points, its worst level in 21 years. But at the time, RMB chief economist Ettienne le Roux warned that it could worsen because the slowdown from the pandemic was just beginning. At its worst the BCI fell to 12 index points reached during the 1980s and the height of political unrest in SA, and for a period in the late 1990s when the interest rates shot to about 23%.
This BCI is very “sentiment driven” when compared with its counterpart published by the SA Chamber of Commerce and Industry (Sacci), which measures actual activity, said Sanisha Packirisamy, economist at Momentum Investments. “Given that this is still going to be for the second quarter, I think the sentiment is going to be quite weak,” she told Business Day.
The Sacci BCI has been “temporarily suspended”, Sacci CEO Alan Mukoki told Business Day last week, until business activity starts “returning to normal”.
Manufacturing production data for March follows on Thursday and is not likely to show the full effects of the lockdown, given it came into force during the last week of the month.
But the sector was struggling even before the virus struck, with the most recent print for February showing a contraction of 2.1% year on year, its ninth consecutive month of declines.
The March reading of the Absa purchasing managers’ index (PMI), a gauge of conditions in the manufacturing sector, was “not shooting the lights out”, said Packirisamy. Though the March PMI had recovered, it remained below 50 index points — indicating contraction in the sector.
Mining production for March and April will also be released on Thursday. In February production held up at 7% growth year on year, despite expectations it would slow to 4.8%.
“While the March data for production volumes is expected to have increased on a year-on-year basis, output for the April reading is expected to have come to a grinding halt,” FNB’s economics unit said in a note.
But Investec economist Kamilla Kaplan noted that though mining production was restricted for the first half of April, certain operations continued, including gold and platinum group metals, and coal mines supplying Eskom.
These sectors hold relatively large weightings in the mining production index of 16.45% for gold, 23.66% for platinum group metals and 24.72% for coal, said Kaplan. “As such, the extent of decline in headline mining production may have been somewhat mitigated,” she said.
In addition, from mid-April regulations were amended to allow all mining to scale up to 50% employment. Nevertheless, mining production is still forecast to have contracted by 35% year on year in April, she said.