In contrast to the flurry of activity about the Reserve Bank’s decision to keep interest rates on hold last Thursday, this week will be a quiet one on the data front, with the focus likely to fall on SA’s latest trade balance.
The country recorded its seventh consecutive trade surplus in November. Topping R36bn, it took the year-to-date trade surplus to a huge R242bn. This was the sixth consecutive month during which SA’s trade surplus measured about 10% of GDP.
Economists expect the trade account to deliver an even larger surplus in December, possibly as high as R40bn, and to continue posting surpluses for the immediate future even if import demand does pick up a little in 2021.
Traditionally, the trade account registers a sizeable surplus in December mainly because there is a large seasonal decline in imports, explains Investec economist Kamilla Kaplan. She is forecasting a R38.4bn surplus for December.
“This year the decline in imports is likely to have been amplified by the weakening in domestic consumption and investment activity from the lingering effects on incomes and demand of the strict first-half lockdown,” she said.
At the same time, she expects SA’s export growth — though likely bolstered by higher commodity prices — to have been partially undermined by the second wave of Covid-19 infections and reimposition of lockdown measures in certain of SA’s main export markets.
BNP Paribas economist Jeff Schultz is expecting a surplus of about R40bn. He notes that SA’s terms of trade remain highly favourable due to robust precious and industrial commodity prices at a time when import demand remains curtailed.
Stats SA will release the producer price index (PPI) for December on Thursday.
Both Kaplan and Schultz expect a modest uptick in headline PPI inflation to 3.1% year on year from 3.0% year on year in November, driven mainly by an increase in agriculture and manufactured food inflation, especially meat and grains.
Globally, food prices are rising steeply and helped to push domestic food inflation to 6.1% in December as measured by the consumer price index (CPI). Economists are hopeful that ample rainfall and anticipated bumper harvests will prevent SA food inflation from hitting double digits in 2021.
Private-sector credit extension data for December will be released on Friday.
After six months of deceleration during 2020, private-sector credit uptake steadied at 3.2% year on year in October 2020 before climbing to 3.4% year on year in November. It was supported by renewed demand for corporate credit as well as an uptick in household mortgage demand.
There was a surge in home-buying activity in 2020 backed by historically low interest rates. Even so, the pace of credit extension in November was half of the average growth of 6.8% year on year that prevailed in 2019.
FNB chief economist Mamello Matikinca-Ngwenya expects this positive but muted growth in private-sector credit extension to continue, given the weak demand and labour market conditions prevailing in SA coupled with “prudent” lending from financial institutions.
Schultz says private-sector credit extension may even have slowed slightly in December due to the weak and uncertain economic outlook.
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