SA’s fourth-quarter GDP numbers are likely to be disappointing, thanks to record load-shedding, stubbornly high inflation, supply problems and weak demand, according to S&P.
The GDP forecast is based on the ratings agency’s latest purchasing managers’ index (PMI), which shows new business declined for the third time in four months in December.
The S&P Global SA PMI — which tracks business trends across the private sector, including mining, manufacturing, services, construction and retail — fell by 0.4 points month on month to 50.2.
Readings above 50 indicate growth in activity and those below the midpoint imply a contraction. The index comprises variables such as new orders, output, employment, supplier delivery times, inventories and prices.
“While the PMI stayed above 50 in December for the second month running, this mostly reflected a slight uplift in employment numbers as new orders, output and inventories all declined,” S&P Global Market Intelligence economist David Owen said on Thursday.
“The latest findings suggest that GDP figures are likely to disappoint in the fourth quarter following a more robust expansion in the third quarter,” he added.
SA’s economy grew 1.6% in the third quarter, well above market expectations and taking the economy to levels last seen in 2018, after contracting 0.7% in the second quarter.
The ongoing power cuts depressed consumer demand, a situation that was worsened by international demand and led to a drop in export orders.
Input prices continued to rise, but firms are generally more optimistic with inflation lower now than in early 2022 and hopes are rising that price increases have peaked.
Markets will be keeping a close eye on the next move by the Reserve Bank’s Monetary Policy Committee — which is scheduled to meet on January 26 — after several aggressive interest rate hikes in 2022 in line with the US Federal Reserve. In December, the Fed slowed its rapid pace of interest rate hikes in December from 75 to 50 basis points.
“Purchase costs continued to rise sharply amid supplier shortages, higher fuel prices and currency weakness, but the rate of inflation was the softest for almost two years,” S&P said.
Owen said lower inflationary pressures should help to ease the burden on consumers in 2023, while firms are hopeful that load-shedding will be less of an issue, helping supply chains to recover.
The rolling blackouts undermined supply-chain performance in December as it took longer to deliver items, while material shortages piled on the pressure.
“In response, and in line with weaker sales, firms cut purchasing activity at the fastest rate since January and reduced their input stockpiles,” S&P said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.