SA’S REAL ECONOMY
In April 2021, the IMF raised its forecast for SA real GDP growth to 3.1% for 2021 and 2.0% for 2022, from 2.8% and 1.4%, respectively, previously. High-frequency macroeconomic data for SA appears highly erratic following from the abnormal base effects from 2020.
SA’s mining production growth eased to 0.3% m/m in April, from 4.7% in March. In the three months to April, mining production rose 6.5% q/q, indicating that the industry may make a positive contribution to GDP growth in 2Q if this trend persists. Sales are 55% higher for the YTD compared to the same period in 2020.
SA’s manufacturing output contracted by 1.2% m/m in April, from 3.7% growth in March, worse than consensus of +0.5%. The decline in output in April was driven by petroleum and chemicals (-4.1% m/m), food and beverages (-2.7% m/m), textiles and clothing (-3.6% m/m), and furniture (-2.6% m/m).
SA retail sales declined 0.8% m/m in April, from -4.5% in March, much worse than consensus estimates of +1.5%. In April, credit extension to both corporates and households remained subdued; the retail sales trend in April simply reflects this weak credit growth and demand in SA.
SA private-sector credit extension rose 0.6%, from -0.1% in April. There was a sharp monthly pickup in investments and bills, while instalment sales credit rose by the most since November 2020. Mortgage advances rose 0.6% m/m, the 12th consecutive monthly rise driven by low interest rates. Loans to households rose 0.6% m/m in May, from +0.2% in April, while loans to corporates remained flat over the month. The fact that instalment sales credit rose strongly in May suggests better consumer spending likely from May onwards. However, there are several risks in the coming months likely to impact consumer demand –while a broad economic recovery will buoy household wealth, stricter lockdown restrictions, concern over the extent of the third wave and high levels of unemployment will likely keep the consumer cautious. The fact that SA’s national savings rate continues to rise (to 18% of GDP in 1Q21, from 14.2% in 4Q20), and corporate credit demand remains subdued, suggests still-significant caution.
The SA trade account posted a surplus of R54.6bn in May, from R51.3bn in April, ahead of consensus estimates of R49.6bn. The trade surplus for the YTD is currently R202.6bn, up from R10.6bn during the same period last year. Upbeat global demand, particularly demand for minerals and vehicles, has boosted SA exports during the current economic recovery.
Source: Bloomberg, Stats SA, Nedbank CIB Markets Research - REEZWANA SUMAD & WALTER DE WET, CFA
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Data Source: FE Analytics
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