Inflation expected to be unchanged
Consumer inflation for November will be watched closely in the week ahead.
Economists are expecting the headline figure to remain at its recent lows, reflecting a reduction in fuel prices.
Inflation, as measured by the consumer price index, is expected to be unchanged at 3.7% year-on-year for November.
“Whereas petrol prices added 0.5 percentage points to overall inflation in May, they cut 0.2 percentage points from the headline figure in October,” said Capital Economics senior emerging-markets economist John Ashbourne. “Figures from the regulator show that prices fell even further in November, increasing this drag.”
If it does, this would be the fifth month running that the headline figure has fallen below the midpoint of the SA Reserve Bank’s 3%-6% target band.
Ashbourne said that despite inflation being at its lowest level in eight years it was unlikely this would push the Reserve Bank to cut interest rates at its next meeting in 2020.
After falling to its lowest level in four-and-a-half years in October, producer inflation (PPI) is set to remain low in November. FNB economists said this would probably go on in the near term. The fall in PPI was attributed mainly to thoughts “that the rand exchange rate is expected to be relatively steady over the next couple of months, while high fuel price base effects are also expected to keep the PPI well contained”.
Manufacturing production figures for October are due on Tuesday with the year-on-year figure expected to have contracted for the fifth successive month. The median forecast among six economists polled by Bloomberg is for manufacturing production to have contracted 2.6% from 2.4% in September.
FNB economists said the October print would probably be a contraction due to the high base of a 3.2% expansion in October 2018, intermittent power outages and lacklustre domestic demand.
Stats SA is set to release mining production figures for October on Thursday.
The median forecast based on six economists polled by Bloomberg is for mining production to have contracted 2.3% year on year from an expansion of 0.2% in September.
Retail sales figures, which are due on Wednesday, are expected to reflect a subdued consumer environment after increasing only 0.2% year on year in September.
“The effects of pressure on consumer disposable income, relatively modest momentum in household credit extension and depressed consumer confidence are reflected in a suppressed retail sales performance,” said Investec economist Kamilla Kaplan.
“The October retail sales outcome is forecast to show essentially stagnant growth.”
Quarterly employment figures from Stats SA are expected to paint a gloomy picture of the labour market. Kaplan said the quarterly employment survey, which includes details on wage developments in various sectors, will probably show moderate growth.
The Bank’s Quarterly Bulletin for the third quarter is due on Friday.
“We suspect that household balance sheets are likely to have deteriorated further. To this end, we will be paying close attention to disposable income growth, net wealth, household debt and debt servicing costs,” said FNB economists.