ECONOMIC WEEK AHEAD: Busy week ahead for data releases

It will be a busy week ahead with several month-end data releases due, as well as the quarterly employment data, consumer confidence index and the SA Reserve Bank’s quarterly bulletin.

Data releases scheduled for this week include business cycle indicators, land transport, tourist accommodation, food and beverages, liquidations, producer inflation, money supply, private sector credit extension, and the foreign trade balance and fiscal balance for May.

The Nedbank Group Economic Unit expects annual growth in loans and advances (which exclude investment and bills) to have accelerated to 4.2% in May from 3.1% in April, driven by growth in corporate credit, which continues to be supported by investment in renewable energy. Growth in credit extension to households will probably remain modest at about 3.5%, reflecting the impact of high interest rates, weaker household finances and fragile consumer confidence.

The Bureau for Economic Research (BER) at Stellenbosch University will release the FNB/BER consumer confidence index for the second quarter on Thursday. The index is a good measure of consumers’ willingness to spend.

The fieldwork of the second-quarter index took place after the May 29 election results were announced, but there was still little certainty about what the seventh administration would look like. Slowing inflation usually helps with consumer confidence, but borrowing costs remained high during the survey period and the BER said the costs are not expected to come down in the very near future. Consequently, Trading Economics forecast that the index would ease to minus 18 from minus 15 in the first quarter.

The BER noted that the fourth-quarter release was the first based on a new sample and showed a much stronger post-Covid jobs recovery than previously thought, though formal non-farm employment still fell by 194,000 jobs quarter on quarter in the fourth quarter.

The disappointing first-quarter GDP print suggests that employment may also be poor, but the already released household survey for the first quarter suggests there could be a slight quarterly bump in formal non-farm employment. The relationship between the two employment measures, however, is far from perfect.

The BER said that after an acceleration in producer inflation in April, it expected headline producer inflation to tick down in May. With recent more favourable-than-expected fuel price dynamics, the peak in producer inflation is likely behind us, and factory gate inflation is likely to slow through the remainder of the year, though not in a linear fashion.

But Nedbank expects an uptick in annual producer inflation to 5.3% in May, from 5.1% in April, mainly driven by the “coke, petroleum, chemical, rubber and plastic products” category. Within this category, most upward pressure will emanate from diesel and petrol, which recorded annual price accelerations even though the monthly increases were slower. However, the upside was contained by a deceleration in food prices off a high base and also due to some moderating input costs.

Nedbank expects the foreign trade surplus to widen to R14.1bn in May from R10.5bn in April. Exports will likely increase slightly faster over the month (up by 5% from 4.4% previously), helped by less disruptive load-shedding and a modest increase in commodity prices. However, general conditions in the export market remain subdued by weak global demand and logistical challenges. Imports are estimated to have increased by a slower monthly rate of 3% from 3.8%, contained by subdued demand for consumer goods. Imports will continue to be driven by purchases of machinery for renewable energy projects.