Fears mount of another contraction
After disappointing manufacturing data, which showed the sector will be a drag on third-quarter GDP growth, all eyes will be on retail sales and mining production figures this week for evidence that the economy is not about to suffer another quarterly contraction.
After disappointing manufacturing data, which showed the sector will be a drag on thirdquarter GDP growth, all eyes will be on retail sales and mining production figures this week for evidence that the economy is not about to suffer another quarterly contraction.
Real GDP growth rebounded to 3.1% quarter on quarter in the second quarter, a massive turnaround from the first quarter’s 3.2% contraction when load-shedding and strikes took a heavy toll.
But this has raised the statistical base going into the third quarter, making it harder for the economy to sustain an upward trend.
Given a hefty 3.8% quarteron-quarter contraction in manufacturing output, and contraction in business and consumer confidence, it is feared that third-quarter GDP growth could be nearly zero or even negative.
“[Last] week’s activity data added to the evidence that the economy faltered in the third quarter,” says Capital Economics senior emerging market economist John Ashbourne.
“We will know more when retail and mining figures are published … but there’s an underappreciated risk that the economy contracted again.”
Stats SA will publish September retail sales growth on Wednesday.
Retail sales volumes have slowed in recent prints and remain weak compared with the long-run trend.
BNP Paribas economist Jeff Schultz says that he expects retail sales to have climbed to 1.9% year on year from 1.1% in August, mainly on the back of subdued domestic inflation, one of the few things propping up disposable incomes in a lacklustre environment.
Investec economist Kamilla
Kaplan explains that household consumption growth has been constrained by high unemployment, slowing income growth and also markedly higher administered prices, such as for electricity.
Relatively subdued household credit dynamics and depressed consumer confidence has also affected the willingness of consumers to spend, particularly on big ticket items, she says.
September mining production figures will be published on Thursday. Economists think the sector is unlikely to have climbed out of negative territory, having contracted 3.2% year on year in August due mainly to the global economy faltering.
Global growth and trade momentum have slowed to the weakest rate since the global financial crisis, says Kaplan. These effects are being worsened by domestic constraints that include inadequate electricity supply and rising operating costs.
SA will be hosting the Africa Investment Forum (AIF) this week, from Monday to Wednesday, with the African Development Bank (AfBD), the World Bank and a host of other sponsors.
Mduduzi Mbada, special adviser to the Gauteng premier, told reporters in Pretoria on Friday that the government will be presenting five mega projects for funding that have passed feasibility and other studies and are ready to be implemented.
At the inaugural AIF last year, investors committed to fund $38.7bn worth of projects. Since then, only about $1.2bn of these deals have been closed.
AfDB spokesperson Victor Oladokun explained that while a lot of commitments are signed during such events, it takes a while before the deals can be closed. What the forum is really about is “tilting” the flow of capital to the continent from largely aid to investment, he said.
It is also designed to allow African heads of state to communicate their policy stance to give investors greater certainty, because “capital only goes where it is comfortable”, Oladokun said.
GLOBAL GROWTH AND TRADE MOMENTUM HAVE SLOWED TO THE WEAKEST RATE SINCE THE GLOBAL FINANCIAL CRISIS