Economic data out this week is likely to show the lingering impact of the recent looting and unrest as well as the Transnet cyberattack on export and manufacturing activity.
The SA economy was buffeted by several supply-side and confidence shocks during July which disrupted supply chains, industrial output, and demand for manufactured goods.
These included the severe Covid-19 third wave and harsher lockdown restrictions as well as the unprecedented looting and arson in KwaZulu-Natal and parts of Gauteng. To top it all, a cyberattack on Transnet caused operations at big ports to grind to a halt.
Their effects should be most evident in the July trade balance, due out on Tuesday, and the Absa Purchasing Managers’ index (PMI) manufacturing survey on Wednesday.
SA has been running the largest current account surpluses in its history thanks to sizeable capital inflows associated with the commodity boom at a time when the pandemic has suppressed imports.
In the first half of this year, the trade surplus climbed to a cumulative R255.5bn compared with just R57bn in the first half of 2020. Exports were up almost 50% compared to the first six months of 2020, and by 46% over the same period in 2019.
The R57.7bn trade surplus SA recorded in June was a record high. But the trade balance could dip sharply in July, reflecting the negative impact on trade of the Transnet cyberattack and unrest, even though SA’s terms of trade has remained supportive.
BNP Paribas economist Jeff Schultz expects the trade balance to remain in surplus but to fall to R34.2bn.
The Absa manufacturing PMI is due out on Wednesday. It plummeted by a record 14 index points — from 57.4 in June to just 43.5 in July — reflecting the impact of the unrest and port disruptions.
Schultz expects the PMI to pick up slightly to 48.5 in August, noting that “manufacturer sentiment and activity are likely to take time to recover, especially from the lasting damage to factories and certain supply chains due to July’s protests”.
The same trends are likely to be evident in new vehicle sales data for August which will be published on Wednesday.
After recording 20% year-on-year growth in domestic sales and 51% year-on-year growth in export sales in June, new vehicle sales growth plunged 1.7% year on year and -33.1% year on year respectively in July as the unrest and cyberattack disrupted the production and delivery of vehicles.
Despite the large drop, year-to-date export figures were still 47% higher than a year earlier.
“This showed that improved mobility and rebounding trading partner growth continued to support exports,” says First National Bank chief economist Mamello Matikinca-Ngwenya. However, she notes that the global growth outlook has palled of late.
Private sector credit extension (PSCE) data for July is also due out on Tuesday. It dropped 0.4% year on year in May, and 0.5% year on year in June, after a 1.8% year-on-year nosedive in April.
The June decline was mainly due to a 5.2% year-on-year drop in corporate credit. In contrast, household credit extension recorded a robust growth of 5.6% year on-year, unchanged from the previous month.
Matikinca-Ngwenya expects these divergent trends to persist, partly reflecting base effects given differences in the sectors’ demand for credit in the first half of 2020.
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