Fitch to steal spotlight from indicators

Adecision from credit ratings agency Fitch may steal the spotlight in a week in which retail sales data, mining figures and business confidence look likely to take centre stage.

Fitch met top roleplayers in the public and private sectors in the past few weeks and economists expect a ratings decision this week.

Fitch took a favourable view of the 2018 budget, saying that it reversed some of the fiscal deterioration seen in 2017. It said it remained to be seen how fiscal policy would evolve under President Cyril Ramaphosa in the face of “persistent risks” to fiscal targets. Fitch, which does not follow set publication dates, affirmed SA at BB+ with a stable outlook in November.

“We expect no ratings change apart from an acknowledgement that the outlook, post the ANC elective conference, has improved,” said First National Bank chief economist Mamello Matikinca.

Business confidence should remain higher than the average over the past few years, although this may wane with the slow economy.

The RMB-BER business confidence index, which is expected on Wednesday, jumped 11 points to 45 in the first quarter on the back of a positive market response to the ANC elective conference and a reprieve from Moody’s.

Last week the South African Chamber of Commerce and Industry’s business confidence index fell to 94 points in May from 96 points in April. “Once investment and employment creation are reinstated, business confidence should shed shortterm variations and enhance economic growth and participation,” it said.

On Thursday, mining and retail sales will provide further indications of how the economy performed at the start of the second quarter.

“There are headwinds gathering for households,” said NKC economist Elize Kruger.

Though the retail sector performed well in the first quarter, some factors that supported retail activity were likely to dissipate somewhat, warned Stanlib chief economist Kevin Lings. Inflation is forecast to rise over the next year, while an increase in taxes, including VAT, and no cuts in interest rates expected may be a blow to consumer spending, he said.

Mining is expected to contract again, said Matikinca.

Nedbank economist Busisiwe Radebe said: “Mining figures are volatile. But stronger global demand and firmer international commodity prices are expected to support production and exports in 2018. The upside will be tempered by a generally difficult operating environment.”