Third-quarter GDP and SA’s current account will be the focus of economic data due this week.
SA’s GDP shrank by 0.7% quarter on quarter in the three months to end-June compared with market forecasts of a 0.8% contraction, as devastating floods in KwaZulu-Natal and intense power rationing negatively affected a number of industries.
Stats SA showed that seven out of 10 activities contracted, with manufacturing hit the most, contracting 5.9% in quarter two compared with 5% in quarter one.
Other sharp declines were seen in agriculture, mining & quarrying, as well as trade, catering and accommodation. On the expenditure side, both household consumption and fixed investment slowed while government spending fell.
Economists expect economic growth for the third quarter to have “lifted” despite “considerable volatility” in monthly indicators.
At the previous monetary policy committee (MPC) meeting, Reserve Bank governor Lesetja Kganyago said the Bank still expects 0.4% GDP growth in the third quarter.
FNB economists are slightly more optimistic, pencilling in a 0.6% third-quarter rise, “underpinned by a rebound in the productive sectors of the economy, with manufacturing production growing by 1.9% quarter on quarter and mining production growing by 2.2%, despite persistent load-shedding”.
FNB chief economist Mamello Matikinca-Ngwenya said even though there are risks to the forecast “largely posed by the performance of the private tertiary services sectors, the transportation sector growth momentum also carried over into the third quarter, underpinned by freight and passenger transportation. Our final estimate is for economic growth of around 0.6% quarter on quarter.”
Investec expects quarter-on-quarter GDP to rise 0.4%.
The Bank will publish the current account balance data for the third quarter on Thursday.
The country’s current account balance swung to a shock deficit in the second quarter, defying market estimates of a R100bn surplus and led to the rand weakening to its worst level in more than two years at the time.
The overall balance on the current account, which is the broadest measure of trade in goods and services, swung to an R87bn deficit, or 1.3% of GDP, from a 2.4% surplus in the previous quarter. This is the first deficit since the second quarter of 2020, when Covid-19-linked lockdown restrictions negatively affected the global economy.
The deficit was attributed to dividend payments to foreign investors, which resulted in the biggest outflow in 15 years. A current account deficit indicates that SA’s external funding needs are growing.
At the past MPC meeting, the central bank said commodity price movements in recent months have been mixed, with oil prices stable and export prices lower the export commodity price basket has come down from earlier peaks.
“As a result of weaker export developments, the current account balance is expected to be -0.2% of GDP this year,” contrary to an earlier expectation of a current account surplus close to 2% of GDP, Kganyago said.
The current account is expected to fall to -1.5% in 2023, -1.9% in 2024 and -2.1% of GDP for 2025.
In a note, FNB economists said the global slowdown should present further downward pressure on trade volumes and all commodity prices.
Also on Thursday, the FNB/BER consumer confidence index for the fourth quarter will be released. SA consumer sentiment tumbled to its lowest in more than three decades during the second quarter of 2022 as a result of a big deterioration in the country’s economic outlook.
Consumer sentiment showed a slight recovery in the third quarter of 2022, after plunging to its lowest level in more than three decades in the second quarter.
Confidence tumbled due to elevated inflation, rising interest rates and escalating unemployment. Consumer confidence is still expected to remain depressed in the fourth quarter as persistent load-shedding continues to weigh on sentiment, while consumers are grappling with falling real incomes.
Manufacturing production for October will also be released on Thursday. Manufacturing production defied expectations, increasing for a third straight month in September, rising 2.9% year on year, well above market expectations of a 2.4% drop.
Manufacturing contributes 14% to GDP and economists said the recovery in the sector was encouraging and points to the sector making a positive contribution to aggregate GDP after the negative contribution in the second quarter.
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