Forecast to show drop in unemployment rate

After enduring a recession during the first half of 2018, the economy ended the year firmer with an expected moderation in the unemployment rate among improvements in key indicators to be released this week. Unemployment is forecast to have declined due to seasonal hiring in the services sector in the fourth-quarter 2018.

Stats SA will publish the Quarterly Labour Force Survey on Tuesday.

Investec expects unemployment to moderate to 27.1% from 27.5% previously. However, Kamilla Kaplan, an economist at Investec, said the gains are temporary. “This hiring is typically reversed in the following quarter,” she said.

FNB chief economist Mamello Matikinca-Ngwenya said the bank expects “the outcome to reflect continued pressure in the labour market”.

Manufacturing production is also forecast to have grown in December.

Recently the Absa purchasing manufacturing index indicated better demand conditions, which suggests the adverse impact of load shedding late in 2018 was limited, Matikinca-Ngwenya said.

Nedbank is expecting production growth of 1.8% year on year in December from 1.6% previously. But operating conditions in the sector are expected to remain challenging in 2019.

Slowing global growth and unresolved trade disputes continue to overshadow growth prospects for the sector.

Retail sales growth is forecast to have moderated to 2% in December from 3.1% year on year in November. November sales rose from the previous month due to Black Friday and Cyber Monday discounts. This subsequently damped December sales.

Retail, manufacturing and mining production data is usually a barometer of the health of the economy. While growth in the other two sectors has firmed, mining is expected to reflect a decline in the threemonth rolling seasonally adjusted measure.

Investec forecasts a decline of 1.5%.

“Commodity price developments, the domestic policy and legislative environment, as well as administered price movements, will be important determinants of the performance of the mining sector in the year ahead,” Kaplan said.

FNB forecast positive mining data, supported by a weak base in December 2017, when the sector reported a contraction of 0.8% year on year.

The SA Chamber of Commerce and Industry trade conditions survey for January 2019 is set to be released on Wednesday.