28 Nov.
Absa: SA Morning Sheet.
This is a daily economic comment …
The sheets can be downloaded daily from Absa Economic Research
An extract from today’s sheet is provided as an example:
In a busy week on the South African data calendar, the focus for markets will likely be on the release of production-side GDP figures on Tuesday. A stronger-than-expected quarter for manufacturing and retail sales leaves us expecting Q3 GDP to rise 1.8% q/q saar versus 1.3% in Q2, broadly in line with Bloomberg consensus. The “two-speed” nature of SA’s economic growth trajectory, however, should remain clearly evident where we expect the mining sector likely remained the largest drag on Q3 GDP growth after production growth fell 18.9% q/q saar in Q3.
The direction of GDP is critical in times of recessionary fears, particularly for policy rate decisions. With inflation rising to 6.0% and GDP expected to rise in Q3 (on q/q saar basis) investors should expect rates to remain unchanged for longer. The economy is certainly not yet out the woods, however, in fact it is rather more likely to be facing them in Q4. For this reason, momentum in leading survey indicators – such as this week’s PMI (Thursday) – is critical.
Private sector credit figures for October are also released on Tuesday. We look for credit to grow by a stronger 5.8% y/y in October (5.5% y/y). Mortgage advances are expected to remain rather languid, and as such, the overall credit growth trajectory should in itself remain rather unexciting. Corporate credit has been performing better over recent months, but we fear that alongside worse business confidence, its momentum may start to lose traction.
Other smaller releases to note this week include October trade balance figures (Tuesday) and NAAMSA new vehicle sales statistics for November on Friday. We would expect the latter to continue to show relatively robust y/y growth rates supported by favourable consumption fundamentals (low interest rates and high nominal income levels).
Markets: In what is a generally a light data week globally, the focal point for markets will very much remain on developments within the euro area. European markets remain under severe stress, with Italian and Spanish bond spreads to German bunds at concerningly high levels and USD funding levels in Europe having risen sharply. Certainly last week’s poor German bond auction did little to ease tensions, and we expect a similar story this week, given the heavy auction calendar in Italy. Such an environment leaves us favouring safe havens (USD and JPY), while we would expect European currencies and EM to come under further pressure this week. Locally, this is likely to translate into another challenging week for the rand and portfolio flows, in our view. For local fixed income markets, a slightly improved Q3 GDP print, as we expect, should leave markets comfortable that further rate easing this cycle is unlikely. However, a global economy that remains on very thin ice and rising domestic inflation dynamics make this balancing act all the more difficult to gauge at this juncture. …
The sheets can be downloaded daily from Absa Economic Research
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