Economist: SA’S growth at risk

RISKS to South Africa’s growth outlook seem to be shifting from being balanced to the downside, Peter Attard Montalto, emerging markets economist at Nomura International, says following the release of weaker than expected manufacturing data.

Manufacturing is the second largest contributor to local gross domestic product, and Nomura International forecasts an economic growth rate of 2.4% for this year, which is much lower than most expectations for closer to three percent.

Manufacturing production fell 2.7% year on year (y/y) in March from a growth of 4.0% y/y in February.

The surprise seemed to be the domestic slowdown had actually been started in the first quarter and had led to a turnaround in the labour market as well, Montalto said. “The speed of this shift confirms the recovery through last year was indeed less robust and more unsustainable than originally thought,” he said.

Montalto said the latest manufacturing data was key for the SARB as their expectations were more set and bearish already on the external environment but more uncertain and somewhat less bearish

“As such we once again have to raise the prospect of rate cuts around September,” he noted.

The likely fall in domestic demand, he added, also reinforced their view that core inflation rises going forward would be much more constrained and allow headline inflation to fall rapidly back to 5.2% at year end. — I-net Bridge

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