Economists have a busy week ahead with a slew of data releases expected, ranging from SA’s own version of non-farm payrolls to consumer confidence, private sector borrowing and the nation’s trade balance.
The data-heavy week kicks off on Tuesday with the release of the country’s quarterly employment statistics, which will provide insight into employment dynamics in the formal non-agricultural sectors of the economy for the first quarter of 2022. Though employment still remains below pre-pandemic levels, the number of people on non-farm business payrolls grew 1.6% in the final quarter of 2021.
Even so, SA is still battling one of the most dismal overall unemployment rates in the world, which at 34.5% when measured for the first quarter of 2022 was moderately down from the record 35.3% jobless rate recorded in the final three months of 2021.
“Also of concern is that full-time jobs have declined while part-time jobs have increased, particularly in community services,” FNB’s economics team of Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano wrote in a research note. “Going forward, the slowing momentum in global growth, induced by the prevailing geopolitical tensions, poses a risk to the recovery in domestic output and employment.”
Wednesday sees the publication of the FNB/BER (Bureau for Economic Research) second-quarter consumer confidence index, which is expected to remain subdued thanks to the financial pressure on households from accelerating inflation and continued weak economic growth. The consumer confidence index declined to -13 index points in the first quarter, after posting -9 index points in the final three months of 2021, well below the long-term average of +2.
“Elevated administered and food prices continue to dilute disposable incomes while unemployment remains at critically high levels,” said Investec economist Lara Hodes. “Concerns over the economic outlook and households’ financial position remain elevated. An expected higher interest rate and cost environment is clearly suppressing sentiment.”
Thursday is the busiest day of a cluttered week of economic publications and includes a flurry of releases pertaining to the month of May: money supply, private sector credit extension, producer price inflation (PPI) and the nation’s trade balance.
Private sector credit extension is forecast to expand by 5.6% year on year in May, according to the median estimate of a Bloomberg survey. While that’s marginally down from April’s reading of an annual 6% growth in private sector credit extension, it still shows that borrowing by corporates and households continues to gain momentum on the back of the relaxation of Covid-19 restrictions.
“Asset-backed finance is still relatively robust in the household segment of the market, with mortgage advances growing by over 6% year on year, but further interest rate hikes, with an additional 50 basis point increase projected in July, [are] likely to weigh on this trajectory,” said Hodes. “A substantial lift in business confidence, which is still subdued, is needed to drive a lift in investment.”
PPI is expected to have accelerated to an annual 14% in May, up from 13.1% the previous month, according to the median estimate of a Bloomberg survey.
“While a moderation in inflation within the coke, petroleum, chemical, rubber and plastic products grouping, in which fuel price dynamics are captured, is likely, food price inflation is expected to remain elevated and, owing to its relatively large size in the PPI basket, continue to weigh on the headline outcome,” said Hodes. “Farmers are also dealing with heightened input costs including fertiliser, agrochemicals and fuel, further weighing on prices.”
SA’s trade balance is likely to record a R26.3bn surplus in May, up from the R15.5bn surplus the previous month, according to the median estimate of a Bloomberg survey. That’s despite worsening global trade conditions and domestic logistics challenges caused by labour disputes in the transport sector as well as flooding in KwaZulu-Natal, which hurt SA’s export potential.
“A relapse in some major commodity prices in May and higher international oil prices would have limited the trade surplus in May,” FNB’s economics team said. “Nevertheless, we still expect relatively favourable terms of trade to benefit the trade balance and thus support a sustained current account surplus. This should cushion the rand from the impact of tightening global financial conditions.”
The busy data week closes out on Friday with the release of Absa’s domestic manufacturing purchasing managers’ index (PMI) for June, which may ease from the May reading of 54.8 as domestic producers came under pressure from weaker demand, load-shedding and flooding in KwaZulu-Natal.
The final economic data point for the week will be the publication of June vehicle sales by Naamsa. Economists will be watching the number closely to gauge how badly the sector has been affected by the flooding in KwaZulu-Natal, which caused supply chain disruptions and the temporary closure of Toyota SA’s manufacturing plants.
“Going forward, stock availability constraints, soaring fuel prices and the general rise in the cost of living as well as rising interest rates should weigh on the domestic car sales market,” FNB’s economics team said.
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