A slew of economic data comes out this week with the main focus on the unemployment rate, the Africa finance industry summit and private sector credit extension data.
Ministers of finance of African countries and governors of Africa’s central banks meet in Lomé in Togo on Monday and Tuesday to discuss how the continent’s industries can contribute to its economic recovery.
Russia’s war in Ukraine has put a strain on African countries’ foreign exchange reserves, sparking energy and food price inflation. At the same time, after the measures adopted during the Covid-19 crisis, central banks are contending with inflation levels not seen since the 2008 crisis.
African central bank governors and finance ministers will discuss strategies on the best way forward for monetary and fiscal measures, especially how they can curb inflation without disrupting growth. They will also discuss the best way to maintain independence in the face of high interest rates and government debt, as well as how to best mitigate the effects of a global recession on the continent’s financial industry.
Stats SA will release the Q3 labour force quarterly survey on Tuesday. SA’s jobs growth defied expectations in the second quarter, pushing the unemployment rate a step closer to pre-pandemic levels as the easing of Covid-19 restrictions sparked a bout of hiring by employers looking to serve consumers who are eating out, shopping and travelling more.
Q2 figures came as a surprise — with the survey showing that the economy created 647,651 jobs in the three months to end-June — given that the economy was broadly expected to have performed poorly at the time due to the KwaZulu-Natal flooding which devastated one of the country’s transport hubs, as well as load-shedding and depressed business confidence.
Stats SA reported that the official unemployment rate fell to 33.9% from 34.5% in the first quarter, well below the median forecast of 35% by five economists surveyed by Bloomberg.
Economists warned that SA’s unemployment rate could reach 40% by the end of the decade, causing societal breakdown, as well as stability risks associated with protests and unrest as millions of adults become excluded from economic life.
Investec economist Lara Hodes expects the Q3 unemployment rate to remain elevated at 33.6%.
Also on Tuesday, the SA Reserve Bank will release the private sector credit growth data for October.
Credit growth
Private sector credit growth surged in September, increasing by 9.7% year on year, defying expectations and rising at its steepest pace in seven years.
While there are signs that consumers are feeling the strain of higher borrowing costs and rampant inflation, businesses seem less affected as demand recovers from low levels and sweeping energy reforms unleash new credit demand for investment spending.
Nedbank economist Johannes Khosa said even though corporate demand would continue to be lifted by base effects and some improvement in private sector fixed investment, particularly renewable energy projects, companies are generally wary of accelerating capital expenditure.
The SA Revenue Service will release data on the country’s trade balance on Wednesday. SA recorded a trade balance surplus of R19.70bn in September — well above August’s R7.2bn, the smallest trade surplus in seven months — and above the Thomson Reuters consensus of a R5bn surplus.
FNB economists said while the trade surplus remains relatively constructive, it is gradually narrowing.
Data show that after peaking at R160bn in the second quarter of 2021, the trade surplus has been steadily compressing, amounting to R50.71bn in the third quarter of this year.
The year-to-date cumulative trade surplus was R175.42bn in September, compared to R346.88bn in the corresponding period last year, reflecting the waning price effect and rising import volumes, while export volumes have been relatively constrained, FNB chief economist Mamello Matikinca-Ngwenya said.
Absa’s manufacturing PMI for November will be published on Thursday. It settled at a neutral level of 50 index points in October, up from 48.2 points the previous month. This was a positive start to the fourth quarter, after the 49.6 points average in the previous quarter.
Matikinca-Ngwenya said the weakness in business activity and new sales orders continued to reflect a frail operating environment.
Local impediments, which include energy and logistical constraints, and slowing global economic activity, particularly in the euro area, remain a risk for local activity, she said.
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