It is a busy week for economic releases, led by SA’s second-quarter GDP figures on Tuesday, which are expected to show a modest rebound after a sluggish start to the year.
“After a marginal 0.1% quarter-on-quarter rise in the first quarter, a modest acceleration is expected, with many of the available high-frequency data showing slight, but broad-based improvement,” said Tracey-Lee Solomon, economist at the Bureau for Economic Research (BER).
“Our high-frequency trackers point to some upside to our published 0.3% quarter-on-quarter forecast,” she said.
Old Mutual chief economist Johann Els said he expected a sharper outcome. “From just 0.1% quarter on quarter in the first quarter (or minus 0.3% if we strip out the strong agricultural performance), I anticipate growth between 0.6% and 0.8% quarter on quarter in the second quarter. In annualised terms, that would mean a rebound from 0.4% in the first quarter to roughly 2.8% in the second quarter,” he said.
“While that sounds encouraging, make no mistake — it still reflects weak underlying growth,” he said, adding that, to reach 1.2% for the year, the second half’s growth would need to maintain roughly the same pace as that of the first half — “a scenario that seems plausible, given easing structural constraints, low inflation, and lower interest rates.”
Economic Week Ahead
Key data releases
- Tue: Q2 GDP figures, expected to show a modest rebound.
- Wed: FNB/BER building confidence index for construction sector sentiment.
- Thu: Manufacturing and mining production for July; Reserve Bank Q2 current account balance.
Industry Events
- Mon: Asisa transformation report presentation in Johannesburg.
- Thu: PayInc launches revamped economic transactions index.
“External headwinds, such as the US trade war, will cap the upside potential.”
Investec economist Lara Hodes also forecasted an improvement, with GDP up 0.4% quarter on quarter. She added that business confidence remained in contractionary territory (below 50), weighing on investment and, accordingly, on growth and job creation.
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Beyond GDP figures, focus is shifting to the initial third quarter activity indicators, which provide an early sense of economic momentum following the second quarter.
“Taken together, [last] week’s PMIs and BCI point to muted third quarter momentum, suggesting that even if second quarter GDP improves, the economy is not gaining real traction,” Solomon said.
Last week, factory activity dipped back into contraction, with August’s reading of the Absa purchasing managers’ index (PMI) falling to 49.5.
Similarly, the RMB/BER business confidence index (BCI) edged down one point to 39 last week, after a five-point decline in the second quarter.
The reading remains below the long-term average of 42, implying that more than 60% of businesses are dissatisfied with prevailing conditions.
Manufacturing and mining production for July will be released on Thursday. Hodes expects factory output to have grown 2.1% year on year.
Mining production is forecast to increase 3.2% year on year, aided by base effects and stronger metals prices, though logistics remain a constraint. “Minerals and metals prices are up when compared with the same period last year,” Hodes said.
FNB Wealth and Investments analyst Motheo Tlhagale noted that the FNB/BER bBuilding confidence index, due on Wednesday, will shed light on construction sector sentiment.
Last quarter the index fell to 36, dragged down by weaker hardware sales, though “architects and quantity surveyors reported strong growth in work, suggesting that building activity could pick up in the coming quarters”.
“Nevertheless, delays in project approvals and client payments remained a concern and could dampen expectations of near-term activity,” he said.
On Thursday, the Reserve Bank will release the current account balance for the second quarter. In the first quarter, the deficit narrowed to R35.6bn (0.5% of GDP).
“This was largely driven by a smaller deficit in the services, income and transfer account, while the trade surplus narrowed slightly as imports outpaced exports. Elevated precious metal prices, alongside softer oil prices, continued to support the terms of trade,” Tlhagale said.
Industry events also feature this week. On Monday, the Association for Savings and Investment SA will present its transformation report in Johannesburg, assessing progress under the amended financial sector code.
On Thursday, PayInc (formerly BankservAfrica) will launch the revamped economic transactions index (formerly known as BETI), which aims to provide more timely insights into domestic economic activity and payments trends.
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