There is quite a bit to look out for next week‚ and not just on the economic calendar‚ says FNB senior industry economist Jason Muscat.
He points out that labour issues are once again coming into focus with the Association of Mineworkers and Construction Union (AMCU) again demanding a R12‚500 basic salary for employees in the platinum sector‚ while the National Union of Metal Workers of South Africa (Numsa) has declared a dispute with the Retail Motor Organisation (RMI).
“While posturing and brinkmanship are all part of the domestic negotiation process‚ rising inflation and growing inequality hold the very real possibility of a protracted impasse‚” Muscat cautions.
“Just this week‚ Treasury officials warned of the implications of above inflation wage expectations on inflation and interest rates. Should a compromise not be reached timeously‚ the economy could quite conceivably be tipped into a recession and register a full-year GDP contraction‚” he warns.
Looking at the economic data due for release this week‚ Muscat says Tuesday’s release of May manufacturing production could well provide a positive surprise when viewed in the context of an improving PMI and trade account.
“We are less hopeful for the May retail trade sales data due on Wednesday which we suspect will post a similar print to April’s paltry 1.5% year on year (y/y)‚ as evidence of consumer strain mounts. Mining production volumes and Motor trade sales‚ both for May‚ round out the week’s releases on Thursday.”
Investec economist Kamilla Kaplan says production and consumption side indicators are likely to reflect a persistence of weak activity in May.
“Manufacturing production is forecast to have increased by 2.6% y/y in May‚ versus 2.9% y/y growth in April. Base factors are likely to have affected the annual growth outcome‚ as production rose in May 2015 after having resumed from the holiday induced decline in April 2015.
“This year‚ the Easter holidays fell into the month of March. Advance indications provided by the manufacturing PMI survey‚ signalled a modest increase in manufacturing sector activity throughout the second quarter‚” Kaplan notes.
She adds that there is scope for the rate of contraction in mining production to have decelerated further in May to -3.1% y/y from -6.9% y/y in April.
“Most commodity prices have rebounded from lows reached in January. In particular‚ the gold price has risen in the region of 18% since January on safe haven demand flows‚ especially more recently‚ on expectations that advanced economy central banks will increase monetary stimulus in the wake of Brexit.
“The higher gold price may have lent some support to gold production‚ which comprises 21% of the mining production index.”
Retail sales growth‚ according to Kaplan‚ is expected to have remained moderate‚ at 1.8% y/y in May.
“The consumer demand environment is constrained by barely positive growth in real disposable income (0.4% y/y in Q1.16) and depressed consumer confidence. Retailers are pessimistic with regard to the outlook for the sector‚ as evidenced by the decline in retail confidence in the second quarter‚” she says.
Strike season is looming
There is quite a bit to look out for next week‚ and not just on the economic calendar‚ says FNB senior industry economist Jason Muscat.
He points out that labour issues are once again coming into focus with the Association of Mineworkers and Construction Union (AMCU) again demanding a R12‚500 basic salary for employees in the platinum sector‚ while the National Union of Metal Workers of South Africa (Numsa) has declared a dispute with the Retail Motor Organisation (RMI).
“While posturing and brinkmanship are all part of the domestic negotiation process‚ rising inflation and growing inequality hold the very real possibility of a protracted impasse‚” Muscat cautions.
“Just this week‚ Treasury officials warned of the implications of above inflation wage expectations on inflation and interest rates. Should a compromise not be reached timeously‚ the economy could quite conceivably be tipped into a recession and register a full-year GDP contraction‚” he warns.
Looking at the economic data due for release this week‚ Muscat says Tuesday’s release of May manufacturing production could well provide a positive surprise when viewed in the context of an improving PMI and trade account.
“We are less hopeful for the May retail trade sales data due on Wednesday which we suspect will post a similar print to April’s paltry 1.5% year on year (y/y)‚ as evidence of consumer strain mounts. Mining production volumes and Motor trade sales‚ both for May‚ round out the week’s releases on Thursday.”
Investec economist Kamilla Kaplan says production and consumption side indicators are likely to reflect a persistence of weak activity in May.
“Manufacturing production is forecast to have increased by 2.6% y/y in May‚ versus 2.9% y/y growth in April. Base factors are likely to have affected the annual growth outcome‚ as production rose in May 2015 after having resumed from the holiday induced decline in April 2015.
“This year‚ the Easter holidays fell into the month of March. Advance indications provided by the manufacturing PMI survey‚ signalled a modest increase in manufacturing sector activity throughout the second quarter‚” Kaplan notes.
She adds that there is scope for the rate of contraction in mining production to have decelerated further in May to -3.1% y/y from -6.9% y/y in April.
“Most commodity prices have rebounded from lows reached in January. In particular‚ the gold price has risen in the region of 18% since January on safe haven demand flows‚ especially more recently‚ on expectations that advanced economy central banks will increase monetary stimulus in the wake of Brexit.
“The higher gold price may have lent some support to gold production‚ which comprises 21% of the mining production index.”
Retail sales growth‚ according to Kaplan‚ is expected to have remained moderate‚ at 1.8% y/y in May.
“The consumer demand environment is constrained by barely positive growth in real disposable income (0.4% y/y in Q1.16) and depressed consumer confidence. Retailers are pessimistic with regard to the outlook for the sector‚ as evidenced by the decline in retail confidence in the second quarter‚” she says.
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