Data in the week ahead should give an indication of the momentum of SA’s economic recovery from a second wave of Covid-19, with new vehicle sales numbers for April as well as a survey of manufacturing conditions for the same month due.
Economic releases for March have already indicated recovery after SA moved to level 1 of lockdown at the beginning of that month, and analysts expect an improving global economic backdrop to continue to prop up local activity in April.
The main event might, however, turn out to be the scheduled release of Moody’s Investors Service credit-rating review after markets close on Friday, though the agency has previously delayed such reviews at short notice.
The scheduled review is not expected to exert much influence on the rand in the lead up to the announcement as it is expected that SA’s sovereign credit rating with Moody’s will remain unchanged at Ba2, two notches below investment grade, said Investec economist Kamilla Kaplan.
“The February budget did outline an improved trajectory for the fiscal metrics and planned reduction in expenditure pressures from civil servants’ salaries and wages over the medium term, which is likely to allow ratings agencies to adopt a wait-and-see approach,” she said.
The Absa manufacturing purchasing managers’ index (PMI) for April is scheduled to be released on Monday, and is expected to show continued expansion in activity after March’s 57.4 points —which was a five-month high.
The PMI — released in conjunction with Stellenbosch University’s Bureau for Economic Research — is a gauge of the health of the manufacturing sector, with a score below 50 indicating a contraction in activity.
The indicator has remained above its neutral level, 50 points, since August 2020.
BNP Paribas senior economist Jeff Schultz expects the PMI to print at 55.2 points, citing normalisation of some of the sub-indices, such as business activity and new sales orders, which had spiked in March as lockdown restrictions had eased in that month.
“The numbers, we believe, should support our review of robust external demand helping to prop up activity in the supply side of the economy,” said Schultz, referring to economic activity stemming from the production of goods or services.
New vehicle sales numbers for April are also due on Monday, having surged 31.8% year on year in March, but having crashed in the same month of 2020 as SA geared up for a hard lockdown.
Domestic vehicle sales likely continued to rise by 0.8% month on month in April, but the year on year growth rate will be hugely distorted by base effects, according to Absa economists.
By excluding this statistical base effect, new vehicle sales will have likely registered modest growth in April 2021, reflecting constrained consumer finances and weak fixed investment rates, said Kaplan.
The IHS Markit SA purchasing managers’ index (PMI) for April, an economywide gauge of business conditions, is due on Wednesday, having risen to 50.3 points in March, from 50.2 points in February.
The PMI gives insight into private sector business performance, through a survey of about 400 private sector companies. A reading of more than 50 shows overall improvement in the sector, with the figure derived from indicators for new orders, output, employment, suppliers’ delivery times and stocks of purchases.
Absa economists expect that the Easter holidays in the month likely boosted activity.
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