SA’s third-quarter GDP figures will be the main highlight this week and are expected to indicate the extent of the damage that July’s riots had on an already fragile economy.
In the second quarter the economy recorded its fourth consecutive three months of growth, showing 1.2% quarter-on-quarter seasonally adjusted expansion as the world steadily recovered from the Covid-19 pandemic.
The GDP print for the third quarter, due on Tuesday, is likely to show the economy weakened from the second quarter, reflecting the impact of the disruption, protests and violence in KwaZulu-Natal and Gauteng.
In addition to July’s unrest — which is estimated to have cost the economy R50bn — tighter lockdown restrictions in the same month are also likely to have weighed on economic activity in the early part of the third quarter.
“The looting and unrest in parts of the country in July, coupled with tighter lockdown restrictions weighed on activity during the early part of quarter three 2021, dampening the quarter’s outcome,” said Investec economist Lara Hodes.
“Moreover, household spending continues to be constrained by heightened unemployment and rising food and fuel prices. We project quarter three 2021 GDP at -1% quarter on quarter seasonally adjusted versus 1.2% quarter on quarter seasonally adjusted in quarter two,” added Hodes.
Also due on Tuesday are retail trade data for October. Investec forecasts retail sales to have moderated to 1.3% year on year, after a 2.1% year-on-year rise in September as rotational load-shedding, which occurred during most of October and escalated to level 4 in the final week of the month, affected trading.
“Consumers have not yet recovered fully from the effects of the pandemic. Indeed, household debt is still elevated, while rising administered prices, particularly electricity and fuel costs, continue to further dilute limited disposable incomes,” said Hodes.
Manufacturing and mining production data for October are due on Thursday. Manufacturing production picked up in August and September as businesses recovered from the July riots, as well as the easing of lockdown restrictions.
However, advance indications provided by the Absa manufacturing purchasing managers’ index (PMI) results last week suggest that business activity declined in October as a result of the three-week strike in the steel and engineering sector. Deeper rotational power cuts are also likely to have weighed on activity.
Investec forecasts manufacturing output to have eased month on month and contracted by 1.4% year on year in October compared with 1.3% growth in September. Mining production is seen to have contracted 0.6% year on year in October compared with a 3.4% decline in September.
The mining industry has been a beacon of hope for the country in recent months, as a global commodities boom led to a R120bn windfall in tax revenue, but power cuts are again hurting the industry and the wider economy.
“Despite the World Bank’s metals and minerals index picking up in October, the robust rebound in global demand driving a significant increase in commodity prices has decelerated,” said Hodes.
“Moreover, industrial activity remains constrained by constant load-shedding and persistent global supply chain bottlenecks,” she added. “Rising Covid-19 cases driven by the new Omicron variant, with a number of countries reinstating lockdown measures, could weigh on the global growth trajectory, impeding commodity demand.”
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