SA economists will be watching this week’s manufacturing and mining data releases to get a sense of how the production side of the economy is doing amid tentative signs of a recovery in certain sectors.
“The mining and manufacturing production updates for March will conclude the sectors’ production figures for the first quarter of the year,” said Kamilla Kaplan, an economist at Investec. “This will provide guidance in terms of the potential contributions to GDP growth in the same quarter. The mining sector is likely to have made a positive contribution to GDP while the manufacturing sector is set to have made a negative contribution.”
SA’s economy contracted 7% in 2020, the biggest slump in 100 years, as a series of socio-economic lockdowns meant to curb the spread of Covid-19 shuttered mines and factories for months on end. While the Reserve Bank has said it is surprised by the robustness of the recovery from the pandemic, it warned the recovery could be K-shaped, a term used to describe an uneven rebound from a recession in which some sectors grow rapidly while others continue to struggle.
Manufacturing data due on Tuesday is expected to show a 0.7% year-on-year expansion in factory output in March, up from a contraction of 2.1% the previous month, according to the median estimate of seven analysts polled by Bloomberg before the release.
SA manufacturing output fell for 18 consecutive months from June 2019 to November 2020 before posting a surprise recovery in December last year. However, factory output declined again in January and February after a resurgence in Covid-19 infections towards the end of 2020 prompted the government to temporarily reinstitute socio-economic restrictions, hurting recovery prospects.
Wednesday will see the release of the BankservAfrica Economic Transaction Index (BETI) for April, which will give an indication of the underlying health of expenditure in the economy.
Data for mining production due on Thursday is expected to show a strong rebound after output fell every month from March 2020 to January 2021. Output at the country’s mines likely increased an annual 15.8% in March, up from a negligible 0.8% increase in February, according to the median estimate of six forecasts in a Bloomberg survey.
“The lower statistical base in March 2020 will partially boost the March 2021 year-on-year change [in mining output],” said Kaplan. “Mining production has derived support from the recovery in global industrial activity and the rise in commodity prices.”
Production data on gold and platinum group metal output for March 2021 is also scheduled for release on Thursday.
The rand and bond markets are likely to take a benign view of the outcome of a scheduled review of SA’s sovereign credit rating by Moody’s Investors Service, which was released late on Friday, long after local markets closed. The review turned out to be something of a damp squib after the ratings agency said only that it opted not to update its Ba2 rating on the country’s debt, which is two notches below investment grade.
“No rating action was taken, as per the announcement,” Peter Griffiths, a media relations executive at Moody’s, told Business Day. “Moody’s sovereign release calendar is indicative of dates for potential actions only.”
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