SA’s trade balance and the manufacturing purchasing managers’ index (PMI) will be top of the list of economic data releases due this week.
First up on Monday will be data on the trade balance for January. In December 2021 the trade surplus narrowed to R30.1bn from R35.8bn in November. From January to December 2021, the cumulative trade surplus amounted to R440.75bn compared with R271.57bn in the matching period in 2020.
“With SA’s terms of trade having peaked (though still elevated) and oil prices rising, the narrowing of the trade surplus should continue into 2022,” said FNB’s economic research team. “Import volumes should catch up with export volumes as the recovery in domestic demand continues.”
SA’s trade surplus, currency, and government finances have all benefited from the strong export value of commodity prices in the past 18 months, said Investec chief economist Annabel Bishop. With SA being a big commodity exporter (mainly of metals, minerals, and agricultural products), Bishop cautions that an “escalation in hostilities in Eastern Europe could see commodity prices falling as markets anticipate lower economic growth.”
The state of the manufacturing sector will also be a highlight this week, with the release of the Absa manufacturing purchasing managers’ index (PMI) for February on Tuesday.
The Absa PMI is based on a survey from respondents in the manufacturing sector conducted by the Bureau for Economic Research, which covers activities such as new sales orders, business activity, and employment.
The gauge provides an early indication of underlying economic activity, with a reading above 50 points suggesting expansion in the sector, while anything below 50 points to a contraction.
The manufacturing PMI recorded 57.1 index points in January, up from 54.1 in December as the Omicron variant-driven fourth wave of Covid-19 receded. The seasonally adjusted business activity lifted to 56.6 index points, from 48.7 previously, while new sales orders also rose. The figures indicate that demand is improving, particularly export demand, and should support the recovery in the manufacturing sector.
“Expectations of near-term business have improved to the most optimistic in nearly four years and should support employment prospects,” said the FNB research team. “The optimism is likely related to the waning impact that resurgent waves of Covid-19 infections have had on the economy and the possibility that supply chain disruptions should dissipate.”
Also on Tuesday, new vehicle sales figures for February will be released by the Naamsa Automotive Business Council.
Domestic new vehicle sales rose 19.5% year on year in January. Meanwhile, exports contracted on an annual basis, down by 9.3%, but could improve as global demand recovers from the Omicron contagion effects and new models are introduced by exporters.
“Elevated fuel prices, rising vehicle prices amid raw material shortages, as well as rising interest rates could dampen local consumer confidence and demand for new vehicles,” said the FNB research team.
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