The Bureau for Economic Research (BER) at Stellenbosch University expects 0.2% GDP growth in the first quarter after a 0.1% gain in the fourth quarter.
BER economist Tracey-Lee Solomon said the forecast was based on the available high-frequency data, but it is increasingly possible the economy stagnated or even contracted. As always, the lack of information on the performance of most industries in the tertiary sector makes it tricky to take a firm view.
Nedbank forecast a stagnation though the weakness in the economy was widespread, hindered by weak domestic demand, continued albeit manageable power outages, and sluggish growth in key trading partners, notably the eurozone and China. The risks to Nedbank’s forecast are balanced, with outcomes in agriculture the greatest swing factor. The data will be released Tuesday.
The Absa May manufacturing purchasing managers’ index (PMI) on Monday and S&P Global May private sector PMI on Wednesday will also provide clues to the second quarter. The PMIs showed an improvement in activity in April but the BER said it it was uncertain that this was sustained in May. Should there be another month of increased activity it would make for an improved recovery in economic activity during the second quarter.
On Monday the new vehicle sales data should show a monthly rise after the large number of public holidays in April, but Nedbank expects the year-on-year growth to moderate to 1.5% from 2.2% in April as high interest rates remain a binding constraint adversely affecting household finances and dampening the demand for credit-financed items.
Smaller deficit
The RMB/BER business confidence index (BCI) for the second quarter will be released on Wednesday.
Business confidence was subdued in the first quarter but activity should have benefited from the lack of load-shedding in the second quarter so far. Some business owners mentioned in 2023 they were in a wait-and-see mode before the elections and were wary of making any major business decisions. Trading Economics expects a small moderation to 27 from 30.
The Reserve Bank will release the first-quarter current account balance on Thursday. Nedbank expects a smaller deficit of about 1.5% of GDP in the first quarter from a 2.3% deficit in the fourth quarter. The narrower deficit will mainly be driven by a wider trade surplus as imports fell faster than exports.
The decline in export volume continued to reflect weak global demand, subdued commodity prices and persistent domestic structural constraints, while weak imports will reflect subdued consumer demand and fixed investment activity. The nontrade deficit should have narrowed, mainly helped by higher income receipts from increased tourist arrivals. Income receipts will also likely be higher than payments over the quarter.
The electricity data for April to be released on Thursday should show an improvement on April 2023 as no gigawatt-hours (GWh) were lost to load-shedding in April compared with 2,927GWh in April 2023 after a 0.7% year-on-year decline in electricity distributed in March.
The Reserve Bank’s gross reserves are projected by Nedbank to have increased to $61.9bn in May from $61.8bn in April, driven by a rise in gold reserves and a marginal growth in foreign exchange reserves. The increase in gold reserves reflects valuation adjustments after a rise in the market gold price. The international liquidity position is likely to increase to $58.1bn from $57.9bn.
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