There will be a slew of economic data released this week starting with the SA Reserve Bank’s private sector credit extension on Tuesday.
SA private sector credit grew 7.5% year on year in June, topping market expectations of 5.86% and following 5.3% growth a month earlier. The June reading marked the 12th straight month of increase in private sector credit and the strongest pace since March 2020 when the country was at lockdown level 5.
Even though June numbers revealed strong demand and lending conditions, economists warn that the impact of interest-rate hikes on demand for credit had not yet filtered through.
Investec economist Lara Hodes said June data covered only the 125 basis points (bps) cumulative interest hikes in the current cycle and had not yet counted the 75 bps increase in July, “and with further monetary tightening expected”, private sector credit extension may begin to slow as interest rates start “to weigh heavily on the indebted”.
Hodes said Investec expects private sector credit extension to ease to 7.3% year on year in July.
On Wednesday, the SA Revenue Service will publish the preliminary merchandise trade statistics, which Alexforbes chief economist Isaah Mhlanga says are likely to show a further narrowing of the trade surplus mainly due to the severe load-shedding in July that adversely affected industrial output.
SA’s trade surplus narrowed to R24.2bn in June from R30.1bn previously, reflecting a modest 1.6% month on month growth in exports and a robust 6.3% growth in imports relative to the previous month. The cumulative trade surplus amounted to R133.5bn compared with R249.9bn in the corresponding period in 2021.
Hodes said Investec expects the surplus to narrow further in July to about R18bn on subdued export activity as slowing global growth weighs on demand.
Data also shows that year-to-date exports, from January to June, were up 9.2%, while imports rose 32%.
The state of the country’s manufacturing activity will also come under the spotlight this week.
Manufacturing is SA’s fourth-largest industry, contributing 14% to GDP and the numbers on Thursday will provide valuable insight into the health of the country’s economy after industrial protests and power outages that disrupted activity in the sector.
The Absa Purchasing Managers’ Index (PMI) fell to 47.6 in July from 52.2 in June, mainly due to electricity supply disruptions.
This marked the first decline in factory activity since July 2021 when the looting and unrest in KwaZulu-Natal and Gauteng hurt output.
Hodes said manufacturing PMI for August is likely to remain subdued, below 50 at about 47.9. A reading above 50 points suggests expansion in the sector, while anything below 50 points to a contraction.
She said the reason for the below-50 forecast is because domestic demand remains subdued while slowing global growth is likely to continue weighing on export potential.
“Advance indications provided by August’s flash PMIs suggest that advanced economies such as the UK, US and eurozone [SA’s largest trading partners] are losing momentum, with a drop-in business activity evident,” Hodes said.
The National Association of Automobile Manufactures of SA (Naamsa) new vehicle sales data for August will also be published on Thursday. Despite the steeper-than-expected interest rate hiking cycle, domestic demand for vehicles has outperformed expectations. New vehicle sales volumes reached 43,593 units in July, an increase of 30.9% year on year but FNB warns that elevated inflation and higher interest rates should weigh on demand and activity.
Lastly, Stats SA will also on Thursday release July data on electricity generated and available for distribution. Electricity production contracted 4% year on year in June when the country experienced some of the worst power outages on record, with load-shedding reaching stage 6 at times, after unlawful industrial action disrupted activity at several power plants.
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