Inflation data and retail sales dominate the first quarter

ECONOMIC WEEK AHEAD

ALTHOUGH the March consumer inflation data will dominate the data release calendar next week, other releases such as those for retail sales and the leading indicator will show how the economy performed in the first quarter.

Consumer inflation eased to 4% year-on-year (y/y) in February from 4.4% y/ y in January and 4.7% y/y in December.

It is rich carnivores that are keeping inflation at or above 4% y/y, as the lowest income group had an inflation rate of only 1.3% y/y, while the highest income group had an inflation rate of 4.2% y/y as meat inflation was 11.4% y/y in February from 13.4% y/y in January.

Overall food inflation eased to 4% y/y in February from 4.6% y/y in January, 4.9% y/y in December and 5.2% y/y in November.

Core inflation, which excludes volatile components such as food and energy, slipped to 4% y/y in February from 4.1% y/y in January and 4.2% y/y in December.

There should be an easing to below 4% y/y in overall inflation in March, largely due to the slowdown in the petrol price y/y increase.

The Gauteng petrol price y/y increase slowed to only 1.6% in March from February’s 3.7% and January’s 8.2%.

The leading indicator rose by 0.3% month- on- month (m/m) in January.

The leading indicator is supposed to forecast economic activity six months ahead.

Five of the 10 component time series that were available for January increased, while the remainder decreased.

The largest positive contributions to the movement in the composite leading business cycle indicator in January came from an increase in the South African produced export commodity price index (US dollar based) and an increase in the Business Confidence Index.

The largest negative contributions was due to a decrease in the average number of hours worked in the manufacturing sector and a deceleration in the 12-month percentage change in the number of new passenger vehicles sold.

Real retail trade sales rose by 3.1% in January after a 2.9% gain in 2017 and a rise to the 4% y/y level is expected in February.

Real wholesale trade sales fell by 1.9% in January after a 3% drop in 2017, but a return to a y/y increase is forecast for February.

Nominal motor trade sales rose by 6% in January after a 3.8% gain in 2017 and a continuation of this positive trend is anticipated for February.

There are two major non- Statistics South Africa data releases due next week as well.

The first is bulk exports and the second is steel production.

South Africa’s bulk export volumes rose by 4.3% y/y to 15.5 million tonnes in February from a revised 54.6% (88.8%) surge in January to a record 20.8 Mt (25.4Mt) according to the Transnet National Ports Authority (TNPA).

TNPA said there was an error in formula calculation for iron ore in January.

Bulk exports excluding Saldanha were up 25.6% in the first two months to 21Mt.

In January bulk exports out of Richards Bay, which are mostly coal, saw a 28.6% y/ y jump to 9Mt, while bulk exports out of Saldanha, which are mostly iron ore, saw a massive 90.6% y/ y surge to a revised 10.2Mt (14.8Mt).

This may in part be due to the shift in the Lunar New Year from January last year to February this year.

So Chinese steel producers front loaded their February iron ore and coal imports into January as steel production curbs, that were imposed during the winter months to ease pollution, will be lifted in February.

Steel production fell by 0.9% y/y in February.

This followed strong growth in the previous months as production grew by 8.1% y/y in January after surging by 20.9% y/y in December and a 10.1% y/y rise in November.

A return to y/y growth is expected in March.

‘Real retail trade

in February’