Reserve Bank review, trade data and PMI on the menu

The Reserve Bank will release its financial stability review on Monday and private sector credit extension on Tuesday. The SA Revenue Service (Sars) releases trade statistics on Wednesday, and on Thursday Absa will release its purchasing managers’ index (PMI).

The Reserve Bank cited sustained load-shedding as one of the stumbling blocks for economic growth and investor sentiment in its previous review.

Financial stability is crucial for sustained economic growth, which cannot be achieved without strong financial systems. The Bank’s monetary policy committee increased rates by 50 basis points (bps) last week in an effort to curb inflation that has worsened on the rand’s sharp slide in recent weeks.

The Bank has now increased rates by a cumulative 475 bps since the start of the hiking cycle in November 2021, placing monetary policy in “restrictive” territory for the first time.

On Tuesday, private sector credit extension data for April will be released. SA’s private sector credit grew 7.2% year on year in March, below market forecasts of 7.75% and easing from 8.3% in the previous month. This was the 21st successive month of growth in private sector credit. But data showed the slowdown in private sector credit extension reflected a moderation in corporate and household credit.

Corporate credit growth slowed to 7.2% from 8.8% while household credit slowed to 7.2% from 7.6% in February.

FNB economists said continued credit growth should somewhat underpin consumer spending and investment, particularly investment related to renewable energy.

Investec economist Lara Hodes expects private sector credit to have picked up modestly when measured on an annual basis in April to about 7.4%. On Wednesday, Sars will release the trade balance for April. SA recorded a trade surplus of R6.9bn in March, below market estimates of R25bn and a downwardly revised R10.7bn in the prior month.

Imports surged 31.7% over the month to a record high of R185.3bn, boosted mainly by purchases of mineral products, machinery, electronics and base metals.

Top import partners were China at 18.5% of total imports and Germany second at 8% while the US was at 7.6%.

Sars said exports advanced at a slower rate of 26.9% to a record high of R192.2bn, primarily driven by shipments of precious metals and stones, base metals and mineral products. Top export partners were China at 10.5% of total dispatches, followed by the US at 7.5% and Germany at 6.5%.

FNB economists said the numbers are consistent with their view of a widening current account deficit over the forecast horizon from -0.5% of GDP in 2022.

Hodes said Investec expects the surplus to have narrowed further in April to about R4bn, underpinned largely by the continued “higher importation of crude oil and petroleum oils” as a result of the weak rand.

On Thursday, the Absa PMI for May will be published. The index rose to 49.8 points in April from an eight-month low of 48.1 points in the prior month. The latest reading pointed to a third consecutive month of contraction in the country’s manufacturing activity, though the softest in the sequence.

Absa senior economist Miyelani Maluleke said the headline PMI would have deteriorated further had there not been significant improvement in the inventories index, which rose to its highest level since mid-2022.

Maluleke said operating business conditions remained unfavourable as persistent loadshedding and logistics challenges weighed on economic activity. He said domestic demand also remains insufficient, underscoring the impact of higher inflation and rising interest rates.

Hodes said business activity was affected heavily by heightened load-shedding. New sales orders are likely to remained subdued, dragged down by a lacklustre domestic economic situation, with minimal growth of 0.2% expected this year.

Also on Thursday, April’s data on electricity generated and available for distribution will be released. In March, electricity production fell 5.6% year on year after declining 9.7% in February. This marked 18 consecutive months of decline.

Production fell 1.6% on a quarterly basis in the first quarter of this year.