Absa: SA Morning Sheet – daily economic comment

31 Oct.

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:

There is a host of smaller, but nevertheless important, data releases for South Africa this week, starting with the release of private sector credit extension (PSCE) figures this morning. We are in line with Bloomberg consensus forecasts in expecting headline PSCE growth to have slowed to 5.9% y/y in September from 6.1% in August. Base effects are expected to be the main culprit behind the slowdown, given the pick-up in PSCE momentum in H2 2010; on a m/m basis, however, we would expect PSCE growth to have ticked up modestly. We will be keenly watching asset-backed components of household credit (mortgage advances etc) within credit in order to gauge the level of tentativeness amongst households’ and financial institutions to borrow/lend aggressively in the current somewhat uncertain economic climate. Notoriously volatile trade balance figures are scheduled for release this afternoon with Bloomberg consensus estimates looking for the trade account to jump back into surplus territory in September (+ZAR1.0bn) after August’s ZAR3.7bn deficit.

PMI and Q3 unemployment figures released tomorrow will also be keenly watched. Though we expect the PMI to have remained above the all-important level of 50 in October (prior: 50.7), we expect some of the key sub-components of this index to continue to reflect the headwinds SA’s manufacturing sector continues to face. Nevertheless a print above 50 would suggest somewhat of a “better” Q4 than Q3’s 47.2 average. Stats SA’s Q3 Quarterly Labour Force Survey (QLFS) is likely to continue to show a relatively mixed picture of SA’s labour market. With many key supply-side industries still operating well below their pre-crisis highs and depressed business confidence levels, we expect the QLFS to continue to look relatively uninspiring.

We would expect NAAMSA’s release of new vehicle sales statistics on Wednesday to show some moderation in growth after having risen a robust 29.8% y/y in September (remember this was partly driven by base effects from industrial action in September 2010). Nevertheless, we believe that resilient demand helped through low interest rates and high nominal income levels should keep October’s growth rates in double digits.

Markets: With PPI still grinding higher, retail sales and manufacturing having impressed on the high side and with offshore concerns off their worst, it would take a pretty poor credit or PMI figure this week to see an aggressive rally in the monetary policy end of the SA curve, in our view. …

The sheets can be downloaded daily from Absa Economic Research