This will be another busy week on the international and domestic fronts, with the International Monetary Fund (IMF) and the World Bank kicking off their 2022 annual meetings in Washington, the US.
Locally, Stats SA will release its manufacturing and mining data for August on Tuesday and Thursday, respectively.
The IMF will release the World Economic Outlook report and the Global Financial Stability Report on Tuesday.
The Washington-based institution’s forthcoming October 2022 World Economic Outlook report will examine economic forces that could affect inflation, focusing on wage dynamics after Covid-19 and with the risk of a wage price spiral. It will also give recommendations on how policymakers should respond to global and domestic inflation challenges.
Inflation has reached a 40-year high in some economies, and though wage growth has generally stayed below inflation so far, “some observers warn that prices and wages could start feeding off each other, with wage and price inflation ratcheting up in a sustained wage price spiral”, the IMF said.
The Global Financial Stability Report will also be released on Tuesday. The report provides an assessment of the global financial system and markets, and addresses emerging-market financing in a global context. It will focus on market conditions, highlighting systemic issues that could pose a risk to financial stability and sustained market access by emerging-market borrowers.
In the previous financial stability report, IMF financial counsellor and director for the monetary and capital markets department Tobias Adrian said central banks should act decisively to prevent inflation pressure from becoming entrenched and to avoid an unmooring of inflation expectations.
“To avoid unnecessary volatility in financial markets, it is crucial that central banks in advanced economies provide clear guidance about the normalisation process while remaining data dependent,” Adrian said. “Emerging markets remain vulnerable to a disorderly tightening of global financial conditions. Further rate increases, or policy normalisation, should continue as warranted according to the country-specific inflation and economic outlook to anchor inflation expectations and preserve policy credibility.”
Also on Tuesday, Stats SA will release August’s manufacturing statistics. Total manufacturing output was up by 3.7% year on year in July, compared with the same time in 2021 when unrest and looting in KwaZulu-Natal and some parts of Gauteng hobbled production.
Stanlib chief economist Kevin Lings said the positive annual growth rate was “heavily distorted” and mainly reflected the low base established in 2021 due to the riots.
“Consequently, the annual rate of change is, currently, not a good indication of the underlying performance within the manufacturing sector,” Lings said. “It is also clear that the loss of momentum during the past six months has been broad based, with large declines recorded in most manufacturing sectors since January 2022 including food and beverages, iron and steel, motor vehicles, rubber products, petroleum products, clothing, and paper.”
On Thursday, Stats SA will publish the August mining production numbers. Mining and manufacturing production will provide valuable insights into third-quarter GDP growth. The data will also provide details on the effect of electricity outages on business activity and output.
SA’s mining industry faced myriad challenges this year, including load-shedding, which was ramped up significantly, reaching stage 6 at times as a result of an unlawful strike. This weighed heavily on the energy-intensive sector, which saw production fall for a sixth consecutive month in July.
Mining slipped 8.4% year on year in July, from a downwardly revised 7.1% contraction the previous month. Economists surveyed by Thomson Reuters expected a 5% fall.
FNB economists said they expect mining output to rebound in the third quarter as labour-related disruptions have receded.
On Wednesday, the IMF will release its Fiscal Monitor report, which provides an overview of the latest public finance developments, updates the medium-term fiscal outlook and assesses fiscal implications of policies relevant to the global economy.
The IMF said fiscal policy needs to address the humanitarian crisis and economic disruption while being flexible and ready to adjust as the outlook becomes clearer.
“There are large risks around the outlook for deficits and debt, especially if economic growth disappoints or inflation dynamics continue to surprise,” the fund said. “Debt is projected to continue to rise in emerging markets, mainly driven by China, reaching 72% of GDP by 2024. Public debt is expected to go down faster in commodity exporters thanks to positive terms-of-trade shocks.”
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