THE economic calendar will be dominated by the release of SA’s gross domestic product (GDP) growth figure for last year and the manufacturing sector’s purchasing managers index (PMI) for this month. However, neither is expected to paint a positive picture about the state of the economy.
After a 1.3% contraction in the second quarter of last year, the economy narrowly avoided entering a recession in the third quarter. It recovered to post positive quarter-on-quarter growth of 0.7%.
But viewed from a year-on-year basis, real GDP growth was 1% in the third quarter, the slowest rate since the 2009 recession.
The consensus expectation is that annual growth would have probably slowed to just 0.4% in the final quarter, driven down by a slowdown in manufacturing, mining and agriculture. This would bring full-year GDP growth to 1.3% last year.
Statistics SA is due to release the data on Tuesday, which will exclude the routine statistical revisions to annual GDP going back to 2010.
These will be communicated prior to the release of SA’s first integrated GDP figure on June 7, "so that users have the history before we release the latest numbers", said Statistics SA’s Joe de Beer.
The country’s economy has been slowing for the past four years. It posted growth rates of just more than 3% in 2011, 2.2% in 2013 and 2012, and 1.5% in 2014.
SA’s GDP growth has now fallen behind the rate at which its population is expanding, which means per capita incomes are declining.
South Africans are becoming poorer by the day. "Sadly, the outlook for growth this year … (is) significantly worse," said BNP Paribas economist Jeffrey Schultz.
"The headwinds to growth have begun to materialise along with sharply rising inflation. This highlights the stagflationary bind the economy finds itself in."
The consensus is that the economy will probably grow 0.9% this year, rising to 1.7% next year. But the risks are firmly to the downside.
This slowdown partly reflects the expectation that mounting inflation, rising interest rates and higher taxes will further erode consumer spending, while electricity constraints, weak global and domestic demand, and depressed business confidence will keep the brakes on production and private fixed investment.
The PMI slid to 43.5 index points last month, a level last recorded when the global financial crisis struck. The index has been languishing below the 50 neutral mark for six consecutive months, and is expected to have remained there this month, an indication that the sector is contracting.
"Faltering global and domestic demand, weaker commodity prices and manufacturing business confidence, which remains at crisis lows, are all unlikely to see a turnaround in SA’s supply-side growth fortunes any time soon, in spite of the weaker rand helping to cushion some of the blow to larger, more export-oriented manufacturers," Mr Schultz said.
SA’s volatile monthly trade numbers will be scrutinised on Monday for any evidence that a weaker rand is bolstering exports.
Imports will bear watching for the effect of drought on maize imports, given that production is forecast to be about 30% lower this year.
Trends in the current account are of particular interest to investors, given the R25bn net outflow from the local equity market so far this year — the worst performance on record.
Private sector credit data, also out on Monday, is expected to show a small moderation from 10.3% last month because banks are tightening their lending criteria.
However, corporate credit growth remains well supported.