Business indicators tell us the most about the economic state of our nation

ECONOMIC WEEK AHEAD

THE annual State of the Nation address (Sona) on February 8 will dominate events next week, but there will also be some important data releases that will show how we did last year and how 2018 started.

The State of the Nation address was previously called the opening of Parliament and mixes the tradition of the British parliament, as it sets out what the government wants to achieve in its legislative programme, with that of the American Congress, in that the government highlights what has been achieved in the past year.

The speculation in the media has been dominated by who will deliver Sona this year, but as political commentators know, a week is a long time in politics, so all will be revealed on Thursday evening, unless it is postponed.

The December manufacturing and mining data will be the key data releases next week, but the South African Chamber of Commerce and Industry (Sacci) Business Confidence Index (BCI) will also help to show how economic indicators have reacted in January. The BCI will be released on Wednesday and the manufacturing and mining production data on Thursday, while January tractor sales and bulk export volumes have no fixed release date.

The first major data point is the Sacci BCI. This is a composite index of various sub-indices such as the value of the rand, import and export volumes and other indicators. The BCI rose to 96.4 in December from 95.1 in November, and a further rise is anticipated for January.

Although manufacturing production contracted on a year-on-year (y/y) basis for the period May to July, in August there was a return to y/ y growth and this should continue in December, as retailers depleted their inventories in November owing to the unforeseen demand generated by Black Friday and Cyber Monday special deals, which saw real retail sales surge by 8.2% y/y for the strongest y/y growth since June 2012.

Mining production, on the other hand, could disappoint as bulk export volumes for December showed a 5.0% y/y decline. Mining production surprised on the upside in November with a 6.5% y/y increase after a 5.2% y/y gain in October. The consensus forecast had been for slowdown to a 4.9% y/y rise. In November, output advanced at a faster pace for: coal (8.5% from 6.2% in Octo- ber); platinum group metals (12.3% from only 0.6%) and iron ore (20.7% from 17.9%). A slower y/y increase is expected in December.

South Africa’s bulk export volumes are released by Transnet National Ports Authority (TNPA). This is one of many non- Statistics South Africa data points that help to provide colour to what is happening with the economy. South African bulk export volumes rose by 4.9% in 2017 to a new record of 171.3 million tons (Mt) after falling by 2.8% in 2016 to 163.3 Mt, data from the Trans- net National Ports Authority (TNPA) showed.

The record bulk exports confirm that the South African economy has exited recession and is on its way to surprising most economists with its renewed vigour.

The annual increase was despite a 5.0% y/y drop in December and a 7.7% y/y fall in November as it had been preceded by a 30.7% y/y surge in October to a record monthly 16.7 Mt. The October 2017 record was set despite a severe storm that disrupted port operations in KwaZulu-Natal. A return to y/y growth is forecast for January.

Tractor sales rose by 8.7% in 2017 to 6 362 units. This followed a 11.3% fall in 2016 when drought conditions prevailed in the summer rainfall area.

The 2017 annual total was boosted by a late surge as December sales increased by 19.8% y/y following a 24.9% y/y jump in November. The strong gains in the last two months of 2017 should carry over into 2018 with a doubledigit y/y gain expected for January.