Data to give snapshot of tough conditions

THE World Bank is releasing its Africa economic update today, while the International Monetary Fund (IMF) is bringing out its April World Economic Outlook report tomorrow.

The bank’s report is expected to focus on the ripple effects of the global commodities price rout on SA and its continental peers, while IMF MD Christine Lagarde has warned the fund will revise down its global growth forecasts.

Last week, ratings agency Standard & Poor’s (S&P) revised SA’s growth projection for this year to 0.8%, down from 1.6%.

It anticipates the economy will grow 1.8% next year, down from a 2.1% forecast.

S&P, which has SA a notch above a subinvestment grade rating with a negative outlook, cited the commodities price meltdown, drought, structural issues such as poor labour-market outcomes and infrastructure bottlenecks, particularly in energy, when justifying its downward revision.

The ratings agency is likely to downgrade SA to junk status in June, when it reviews the country’s credit rating.

It is against this backdrop that SA’s consumer confidence, retail sales, and mining production data are coming out this week.

Tomorrow the Bureau for Economic Research and First National Bank’s (FNB’s) consumer confidence index for the first quarter of this year will give a glimpse of whether households are optimistic about the economy.

Indications are that the mood will not have picked up from the dire -14 recorded in the last quarter of 2015.

In January, the Reserve Bank hiked interest rates by 50 basis points. The Bank repeated this move last month, when it raised rates by 25 basis points. The jobs blood bath continues, food prices are soaring, inflation is on an upwards trajectory, and fuel is becoming costlier.

These factors have placed a heavy burden on shaky consumer confidence. A persistent negative outlook among households does not augur well for spending, a major driver of growth.

On Wednesday, February retail sales data will be released by Statistics SA. This data will give a glimpse of whether tills have been ringing, and how the economy held up in the first quarter.

Wholesale, retail and motor trade, catering, and accommodation account for 13.7% of the country’s gross domestic product. The pace of increase in retail sales slowed to 3.1% in January year on year, from 4.1% in December.

FNB economist Mamello Matikinca said she expected another “decent performance” in retail sales for February, but warned that sales would come under pressure in coming months. Ms Matikinca cited fuel price and tax hikes, and higher electricity tariffs, which would erode disposable income.

Wholesale trade sales for February are coming out on Thursday, but will be overshadowed by mining production figures. Mining production fell 4.5% in January, compared to a year ago, after declining 1.2% in December.

Mining companies, hit by rising input costs and low commodity prices, are reducing production and retrenching workers.

In January, the IMF revised down the world economic growth forecast for this year to 3.4%, from 3.6% in October last year. It also cut the growth projection for next year to 3.6%, from 3.8%.

Capital Economics Africa economist John Ashbourne said a gloomier outlook abroad would act as “another kick to the local economy”, but he said this would not be the most important factor for the country.

“Domestic issues — drought, inflation, political risk — pose a much bigger risk to SA’s outlook than slightly slower global growth,” Mr Ashbourne said.

The jobs blood bath continues, food prices are soaring, inflation is on an upward trajectory and fuel is costlier