Absa: SA Morning Sheet – daily economic comment

12 Jul.

Absa: SA Morning Sheet.

This is a daily economic comment …

The sheets can be downloaded daily from Absa Economic Research

An extract fro today’s sheet is provided as an example:

The production side of the South African economy comes into focus today with the release of manufacturing production numbers from Stats SA this afternoon (13:00 SA time). We are at the low range of economists’ forecasts (cf. 2.4% y/y) in looking for headline growth to have risen 1.1% y/y in May after slowing sharply to 0.4% in April.

Although favourable base effects should help to prop up y/y growth, on a seasonally adjusted m/m basis, we expect production to have fallen about 0.5%. Though not as severe as April’s 3.7% contraction, continued production difficulties and component shortages in the automotive industry (which accounts for around 11% of total manufacturing production) related to the Japanese earthquake earlier this year will likely continue to weigh on production.

We think evidence of this was already reflected in May’s PMI business activity index, which slipped to 56.8 from 58.4. On a brighter note, some positives will help to temper the May slowdown: exports increased, vehicle sales were robust and the PMI leading index (new sales orders less inventories lagged by about five months) rose.

In our view, this week’s manufacturing production release will likely affirm that the rapid Q1 growth in the manufacturing sector (+14.5% q/q saar) will not continue, although that rate of expansion was not expected to be sustained, given the still-low levels of capacity utilisation and the fact that production remains below pre-crisis peaks.

In international markets, the focus is likely to be on UK inflation figures and the Ecofin meetings in Europe today. Our UK economists are in line with consensus in expecting the CPI to have increased 4.5% y/y in June, unchanged from the prior month’s rate. However, they expect RPI inflation to have increased 5.3% y/y in the month (consensus: 5.2%). …

The sheets can be downloaded daily from Absa Economic Research