Focus is on quarterly GDP number

Third-quarter GDP and SA’s current account will be the focus of economic data due this week. GDP shrank 0.7% in the June quarter, but economists expect thirdquarter economic growth to have been lifted despite “considerable volatility” in monthly indicators.

Third-quarter GDP and SA’s current account will be the focus of economic data due this week. SA’s GDP shrank 0.7% quarter on quarter in the June quarter compared with market forecasts of a 0.8% contraction, as KwaZulu-Natal floods and power rationing negatively affected several industries.

Seven out of 10 activities contracted, according to Stats SA. Manufacturing was hit worst, contracting 5.9% in the second quarter compared with 5% in the first quarter.

Other sharp falls were in agriculture, mining & quarrying, as well as trade, catering and accommodation. On the expenditure side, household consumption and fixed investment slowed while government spending fell.

Economists expect thirdquarter economic growth to have been lifted despite “considerable volatility” in monthly indicators.

At the previous monetary policy committee (MPC) meeting, Reserve Bank governor Lesetja Kganyago said the Bank still expects 0.4% GDP growth in the third quarter.

FNB economists are slightly more optimistic, pencilling in a 0.6% third-quarter rise, “underpinned by a rebound in the productive sectors of the economy”, with manufacturing production up 1.9% quarter on quarter and mining production growing 2.2%, despite loadshedding.

FNB chief economist Mamello Matikinca-Ngwenya said even though there are risks to the forecast “largely posed by the performance of the private tertiary services sectors, the transportation sector growth momentum also carried over into the third quarter, underpinned by freight and passenger transportation.

“Our final estimate is for economic growth of around 0.6% quarter on quarter.”

Investec expects quarter-onquarter GDP to rise 0.4%.

The Bank will publish the current account balance data for the third quarter on Thursday.

The current account balance swung to a shock deficit in the second quarter, defying market estimates of a R100bn surplus and led to the rand weakening to its worst level in more than two years at the time.

The overall balance on the current account, which is the broadest measure of trade in goods and services, swung to an R87bn deficit, or 1.3% of GDP, from a 2.4% surplus in the previous quarter. This is the first deficit since the second quarter of 2020, when Covid-19-linked lockdown restrictions affected the global economy negatively.

The deficit was attributed to dividend payments to foreign investors, which resulted in the biggest outflow in 15 years. A current account deficit indicates that SA’s external funding needs are growing.

At the past MPC meeting, the central bank said commodity price movements in recent months have been mixed, with oil prices stable and export prices lower the export commodity price basket has come down from earlier peaks.

“As a result of weaker export developments, the current account balance is expected to be -0.2% of GDP this year,” contrary to an earlier expectation of a current account surplus close to 2% of GDP, Kganyago said.

The current account is expected to fall to -1.5% in 2023, -1.9% in 2024 and -2.1% of GDP for 2025.

In a note, FNB economists said the global slowdown should present further downward pressure on trade volumes and commodity prices.

Also on Thursday, the FNB/BER consumer confidence index for the fourth quarter will be released. SA consumer sentiment tumbled to its lowest in more than three decades during the second quarter of 2022 as a result of a big deterioration in the country’s economic outlook.

Consumer sentiment showed a slight recovery in the third quarter of 2022, after plunging to its lowest level in more than three decades in the second quarter.

Confidence tumbled due to elevated inflation, rising interest rates and escalating unemployment. Consumer confidence is still expected to remain depressed in the fourth quarter as persistent loadshedding continues to weigh on sentiment, while consumers are grappling with falling real incomes.

Manufacturing production for October will also be released on Thursday. Manufacturing production defied expectations, increasing for a third month running in September, rising 2.9% year on year, well above market expectations of a 2.4% drop.

Manufacturing contributes 14% to GDP and economists said the recovery in the sector was encouraging and points to the sector making a positive contribution to aggregate GDP after the negative contribution in the second quarter.