MPC and YES will dominate busy data week ahead

Published Mar 24, 2018

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JOHANNESBURG - There will be a flurry of data releases next week as there will be the normal month-end data releases, but the focus of economists will be on the launch of the Youth Employment Service (YES) on Tuesday and the decision by the South African Reserve Bank (SARB) Monetary Policy Committee (MPC) on Wednesday.

The launch of the YES is important as that will put into action some of the promises made by President Cyril Ramaphosa in his State of the Nation Address. Economists will be looking at the timeline, the numbers involved and the funding for YES.

Three quarters of economists expect the MPC to cut the repo rate by 25 basis points with some even looking for a 50 basis points cut, while others expect no cut. The drop in the inflation rate to 4.0% year-on-year (y/y) in February from 4.4% y/y in January provides scope for a further cut in the repo rate after a 25 basis point decrease in July 2017. 

The week starts off with a flurry of minor statistical releases. The January land transport, food and beverages, as well as tourism accommodation help to give colour in how the different sectors of the economy are performing.

In that respect the annual causes of death and tourism satellite account, both for 2016, shed light on how successful the Department of Health has been in fighting the scourge of AIDS, while the Department of Tourism can see how tourism bounced back after the sharp decline in foreign tourists in 2015 due to the imposition of more stringent visa requirements. 

The fourth quarter Quarterly Employment Statistics (QES) will show how strong the seasonal bounce in formal sector employment was and whether there was an improvement from a year ago. In the third quarter, the QES showed that South Africa’s formal non-agricultural sector shed 31 000 jobs in the third quarter of 2017. With losses of 41 000 in the first quarter and 31 000 in the second quarter, this marked the third straight quarter of job losses. On year ago basis, 83 000 formal jobs had been lost.

The money supply data on Thursday will show whether there is renewed appetite for credit from the household sector, as this has been subdued in the past few months, but the 7.9% year-on-year (y/y) surge in real retail sales in November shows there is renewed appetite for credit. Broad M3 money supply growth eased to 5.83% y/y in January from 6.42% y/y in December and 6.61% y/y in November, while narrow M0 money supply growth rose to 7.11% y/y from 6.83% y/y.

Producer inflation for final manufactures eased to 4.8% in 2017 from 7.0% in 2016 and we should see subdued producer inflation in February due to the strength of the rand. Intermediate goods prices rose by 4.0% in 2017 after a 6.8% gain in 2016. Electricity price increases moderated to 5.8% in 2017 from 10.4% in 2016. Mining prices increased by 5.4% in 2017 from a 11.5% surge in 2016. Agricultural prices were stable with only a 0.4% rise in 2017 after a 16.4% jump in 2016.

The foreign trade deficit widened to a record R27.7bn in January 2018 from R10.3bn in January 2017 and R19.5bn in January 2016 and economists are expecting another deficit in February, albeit around half the size of January’s, as exports recover falling on a monthly basis in January.  The 2017 foreign trade surplus was R80.55bn after only a tiny R1.05bn surplus in 2016.

The January fiscal data confirmed that government revenue is improving this year, which is why the National Treasury announced this week that they will be reducing the size of the weekly bond auctions to R2.4bn from R3.3bn. Revenue growth was 10.1% y/y in January from 10.0% y/y in December, 6.7% y/y in November and only 3.1% y/y in October.  

- BUSINESS REPORT 

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