The medium-term budget policy statement to be tabled in parliament on Wednesday by finance minister Enoch Godongwana will be the main focus in the economic week ahead.
The Bureau for Economic Research (BER) at Stellenbosch University expects no major surprises on the policy front, with Godongwana likely once again to commit the government to further fiscal consolidation and keeping expenditure in check.
This will not be an easy task and it will be interesting to see how the National Treasury deals with its assumption for growth in the public sector wage bill, for example. It will also be of interest to see the Treasury’s forecast for real and nominal GDP growth in the coming years.
Faster economic growth would be the only way to escape the need for more fiscal consolidation. On the expenditure side, the BER will look out for more insights on how the Treasury is planning to deal with a possible extension of the social relief of distress grant (SRD) and how this could potentially be shaped into a (form of) basic income grant. Also under watch will be any provisions made for the National Health Insurance over the medium term — though the BER does not expect much detail in this “mini budget”.
The Nedbank Group economic unit speculates that the Treasury could announce changes to the inflation targeting framework by lowering the midpoint of the inflation target band to 3% from the present 4.5%.
In addition to the medium-term budget, there is the usual batch of month-end and start-of-the month releases. First up is the September money supply and credit demand data on Tuesday followed by September international tourism.
On Wednesday there is August tourist accommodation, food and beverages, as well as September liquidations. On Thursday we will have September producer inflation data with September foreign trade balance and fiscal balance completing the month-end releases.
Investec expects producer inflation to moderate to 1.2% year on year from August’s 2.8% year on year, while Trading Economics is not as optimistic and only expects an easing to 2.5% year on year. On the foreign trade balance, the forecasts are reversed with Trading Economics expecting a widening in the surplus to R8bn while Investec projects a narrowing to R5bn from August’s R5.6bn.
Friday will see the beginning of the start-of-the-month releases with the Absa/BER purchasing managers’ index (PMI) for October and the new-vehicle sales for October.
Internationally, the main focus will be on the UK Labour Party’s first budget since coming to power. The highly anticipated budget will be published on Wednesday. The confirmation from chancellor of the exchequer Rachel Reeves, long hinted at, that the government is rewriting its rules and its choices on borrowing, and debt isn’t a surprise. The Labour Party wants to take what it sees as difficult decisions early, with the next general election several years away.
On the other side of the Atlantic, the focus will be on the October non-farm payroll data on Friday, mere days before Americans go to the polls on November 5.
Capital Economics expects the Boeing strike and two recent hurricanes to have temporarily cooled the US labour market in October and thinks US non-farm payrolls rose by 100,000 from September’s higher-than-expected 254,000 jump, while the unemployment rate will be steady at 4.1%. Investec takes a similar view and only forecasts a gain of 90,000, whereas the consensus forecast is for a 140,000 increase.
Third-quarter GDP data is expected for the eurozone and the US, with both economies forecast to have grown the same as in the second quarter. Investors will also keenly await the US personal consumption expenditures price data due for release on Thursday to get a better sense of how the US Federal Reserve will modify the pace of interest rate easing, as the Federal open market committee meets the day after the US presidential election with the interest rate decision announced on November 7.
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