SA’s economic calendar this week is headlined by May mining production and retail trade data, two key releases that will shed further light on whether the economy managed to regain momentum in the second quarter after a weak start to the year.
Mining production is likely to have remained under strain, weighed down by logistics constraints and soft demand.
According to Investec’s Lara Hodes, mining output is expected to have slumped by 7.5% year on year, after April’s 7.7% decline, largely driven by a sharp fall in platinum group metals (PGM) production, which alone detracted eight percentage points from the headline reading. PGM makes up 30.2% of the mining basket.
Hodes warned “elevated uncertainty around the effect of tariffs on global trade and growth remains a key downside risk”, while domestic challenges — including high input costs, labour disputes, illegal mining and transport bottlenecks — are likely to continue weighing on output and export potential.
Nedbank economists expect the mining contraction to have persisted for a seventh consecutive month, forecasting a more moderate 2.1% year-on-year decline. While some monthly improvement is anticipated, they also noted that logistics remain a major drag on production.
However, Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research, noted month-on-month output improved for a second month in April. “Another monthly uptick bodes well for the sector’s contribution to GDP growth,” she said.
Retail trade sales, by contrast, is likely to have remained resilient “possibly supported by renewed access to retirement savings under the two-pot system”, IJssel de Schepper said. But “a slight loss of momentum is expected in the May data, as that effect begins to fade”.
Retail sales expanded 5.1% year on year in April. Hodes projects that growth eased to about 4.4% in May, as reflected by decelerating take-home pay and subdued retailer business confidence.
Nedbank expects a more modest 2% increase.
The portfolio committee on water & sanitation will be briefed on Tuesday on the revised raw water pricing strategy, a comprehensive policy framework gazetted in March.
The strategy updates the 2007 policy so that water tariffs cover the full costs of supplying water, encourage people to use water efficiently, and help protect the environment. It also introduces different rates for different types of users — including farmers, municipalities, and industries — while still providing support through phased subsidies to help poor farmers afford water. The strategy’s next step is to move from policy to practice.
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