This week will be a big one in terms of local economic data releases‚ with balance of trade‚ PMI‚ credit extension and consumer confidence providing insight into aggregate demand dynamics‚ according to Investec economist Kamilla Kaplan.
Referring to the release of local balance of trade data on Tuesday‚ Kaplan says both exports and imports are likely to have lifted in May‚ but monthly import growth is likely to have outpaced export growth‚ resulting in a widening of the trade deficit to an estimated R3.5bn from R2.5bn the previous month.
“Export growth is likely to be restricted by the ongoing softness in global demand‚ with advance indicators signalling a further loss of momentum in Q2.15 following a weakening in Q1.15‚” she adds.
April’s performance was affected by seasonal variations related to the configuration of the public holidays‚ she points out.
On the release of private sector credit extension‚ also on Tuesday‚ she says the data is expected to reflect growth of 9.2% year on year (y/y) in May‚ versus a prior 9.4% y/y.
“The disaggregation of the credit data is likely to confirm moderate rates of household credit extension‚ at just under 3.5% y/y‚ and comparatively stronger rates of corporate credit uptake‚ in the region of 15.5% y/y. The SARB’s Quarterly Bulletin for Q1.15 reflected a rise in the household debt to disposable income ratio to 78.4% from 78.0%.
“The ratio remains at historically elevated levels suggesting that indebted consumers are vulnerable to interest rate hikes and/or downward pressure on real disposable income.”
Tuesday also sees the release of the local Quarterly Employment Survey for the first quarter is likely to confirm little improvement in non-farm employment levels from 2014 levels.
“The slowdown in GDP growth in Q1.15 coupled with depressed business confidence and rising operating costs are likely to restrict private sector job creation. Public sector employment levels are likely to have decreased in line with the resignations within the civil service on uncertainty regarding proposed pension reforms‚” Kaplan predicts.
The local BER consumer confidence index‚ due for release on Thursday‚ registered a notable decline in Q1.15 to -4 from 0 previously. Kaplan believes confidence is likely to have remained suppressed in Q2.15 as the litany of factors weighing on confidence in the first quarter‚ ranging from tax increases to electricity supply shortages‚ are likely to have continued weighing on sentiment in the second quarter.
Friday sees the release of the Standard Bank PMI.
“The June flash PMIs released recently for the US‚ China and Euro zone point to continued moderate levels of manufacturing activity. The Euro zone PMI lifted further into expansionary territory but growth in new export orders experienced a further slowdown.
“US manufacturing output growth increased at the slowest rate since October 2013‚ led by a deteriorating export performance. Conditions in China’s manufacturing sector stabilised but manufacturers’ growth expectations were muted. For domestic manufacturers the challenging global macro conditions are exacerbated by domestic factors pertaining to unstable electricity supply‚ rising operating costs and relatively moderate growth in the consumer and allied industry sectors.
“These considerations should be reflected in a PMI reading of 50.5 in June which implies a slow pace of expansion in the sector‚” Kaplan notes.
Big week in terms of economic data releases
This week will be a big one in terms of local economic data releases‚ with balance of trade‚ PMI‚ credit extension and consumer confidence providing insight into aggregate demand dynamics‚ according to Investec economist Kamilla Kaplan.
Referring to the release of local balance of trade data on Tuesday‚ Kaplan says both exports and imports are likely to have lifted in May‚ but monthly import growth is likely to have outpaced export growth‚ resulting in a widening of the trade deficit to an estimated R3.5bn from R2.5bn the previous month.
“Export growth is likely to be restricted by the ongoing softness in global demand‚ with advance indicators signalling a further loss of momentum in Q2.15 following a weakening in Q1.15‚” she adds.
April’s performance was affected by seasonal variations related to the configuration of the public holidays‚ she points out.
On the release of private sector credit extension‚ also on Tuesday‚ she says the data is expected to reflect growth of 9.2% year on year (y/y) in May‚ versus a prior 9.4% y/y.
“The disaggregation of the credit data is likely to confirm moderate rates of household credit extension‚ at just under 3.5% y/y‚ and comparatively stronger rates of corporate credit uptake‚ in the region of 15.5% y/y. The SARB’s Quarterly Bulletin for Q1.15 reflected a rise in the household debt to disposable income ratio to 78.4% from 78.0%.
“The ratio remains at historically elevated levels suggesting that indebted consumers are vulnerable to interest rate hikes and/or downward pressure on real disposable income.”
Tuesday also sees the release of the local Quarterly Employment Survey for the first quarter is likely to confirm little improvement in non-farm employment levels from 2014 levels.
“The slowdown in GDP growth in Q1.15 coupled with depressed business confidence and rising operating costs are likely to restrict private sector job creation. Public sector employment levels are likely to have decreased in line with the resignations within the civil service on uncertainty regarding proposed pension reforms‚” Kaplan predicts.
The local BER consumer confidence index‚ due for release on Thursday‚ registered a notable decline in Q1.15 to -4 from 0 previously. Kaplan believes confidence is likely to have remained suppressed in Q2.15 as the litany of factors weighing on confidence in the first quarter‚ ranging from tax increases to electricity supply shortages‚ are likely to have continued weighing on sentiment in the second quarter.
Friday sees the release of the Standard Bank PMI.
“The June flash PMIs released recently for the US‚ China and Euro zone point to continued moderate levels of manufacturing activity. The Euro zone PMI lifted further into expansionary territory but growth in new export orders experienced a further slowdown.
“US manufacturing output growth increased at the slowest rate since October 2013‚ led by a deteriorating export performance. Conditions in China’s manufacturing sector stabilised but manufacturers’ growth expectations were muted. For domestic manufacturers the challenging global macro conditions are exacerbated by domestic factors pertaining to unstable electricity supply‚ rising operating costs and relatively moderate growth in the consumer and allied industry sectors.
“These considerations should be reflected in a PMI reading of 50.5 in June which implies a slow pace of expansion in the sector‚” Kaplan notes.
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