ECONOMIC WEEK AHEAD: Third quarter GDP growth rate in focus

The main focus in the week ahead will be on the third quarter GDP data expected to be released on Tuesday.

The Nedbank Group Economic Unit expects a slight uptick to 0.5% quarter on quarter from 0.4% in the second quarter. The unit said high-frequency statistics reflected a slight uptick in economic activity during the quarter. The improvement reflects recoveries in mining and manufacturing driven by better operating conditions and firmer domestic demand brought about by falling inflation.

The Bureau for Economic Research (BER) at Stellenbosch University was not as optimistic and expect quarterly growth to come in the range of 0.2%-0.4%, with lingering uncertainty about the volatile agriculture sector and the difficult-to-measure tertiary sector.

High-frequency data from Stats SA indicates expansions in mining and construction but contractions in manufacturing and trade. Possible revisions to the second quarter GDP figures may also affect the third quarter growth rate. Trading Economics was more optimistic and forecast a 0.7% growth rate.

The Absa November manufacturing purchasing managers’ index (PMI) on Monday and S&P Global’s November private sector PMI on Wednesday will provide some clues to the fourth quarter.

The BER said that PMIs were not designed to be sentiment indicators, but a better PMI reading would suggest that underlying sentiment is more upbeat amid improving business conditions, and vice versa.

The FNB/BER consumer confidence index will shed further light on fourth quarter sentiment.

Confidence has improved over the past three quarters, bolstered by lower petrol prices and inflation in general, the Reserve Bank’s interest rate cuts in September and political stability after the formation of the government of national unity. With the implementation of the two-pot retirement system in September providing a boost to spending abilities, conditions are notably better than a year ago.

On Monday the November new vehicle sales data should show whether some of the two-pot withdrawals were used for deposits on new cars. In October, new car sales soared 14.5% year on year.

On Thursday, Stats SA will release the October electricity data. Electricity consumption grew 6.1% year on year in September after a 4.2% year on year gain in August.

In September, power exports jumped 34.3% year on year, while imports fell 22.3% year on year. Non-Eskom generation eased to 2,601GWh in September from 2,730GWh in August. As a percentage of total generation, non-Eskom generation fell to 13.1% in September 2024 from 13.7% in September 2023.

Internationally, all eyes will be on the US labour market data. The economy is set to create more jobs, with the nonfarm payrolls expected to increase by 160,000 in November from only 12,000 in October, which was affected by the Boeing strike and hurricanes Helene and Milton.

The unemployment rate is expected to remain steady at 4.1%. On the monetary policy front, the Bank of India will announce its interest rate decision next week. The market expects the central bank to finally start its easing cycle, with a 25 basis point cut.

China’s November Caixin PMIs for manufacturing and services are expected to show a continued contraction in manufacturing and an expansion in services.

In the US, key employment data will take centre stage. The Bureau of Labour Statistics will release October job openings data on Monday. The data revealed a steep drop in September and the overall downward trend this year shows that the labour market is cooling. Third quarter GDP growth rates will also be released for Australia and Brazil.