Investec expects 1.2% slide in output in June on top of 0.6% drop the month before
Investec expects 1.2% slide in output in June on top of 0.6% drop the month before
Stats SA is set to release June’s manufacturing data during what will otherwise be a quiet week domestically.
Data on manufacturing production for June will round off the second quarter’s economic releases, revealing the sector’s contribution to the quarter’s headline GDP reading.
Investec economist Lara Hodes said in a note they expected that after the 0.6% year-on-year decline in manufacturing output in May, production was projected to have decreased by 1.2% in June.
“Advance indications provided by the Absa purchasing managers’ index (PMI) for June showed that the sector was subdued at the end of the second quarter. The index remained in contractionary terrain at 45.7. The business activity subindex declined during the month while new sales orders remained lacklustre at 37.9,” she said.
However, according to economists at the Bureau for Economic Research (BER) output may have lifted during the quarter due to the good performance in April.
“A strong start to the quarter, with a 5.2% month-on-month increase in April, suggests that even if June production remained flat, manufacturing output would have risen in the second quarter,” said BER economist Tracey-Lee Solomon.
July’s domestic PMI reading picked up notably, moving back into positive territory after a weak performance in May and June, an early indication that the economy is poised to perform better in the third quarter. The PMI improved by 6.7 points to 52.4, probably because of stronger domestic and global demand filtering through to higher business activity and new sales orders.
According to economists at Absa, the improvement was likely to also reflected improved confidence after the formation of the government of national unity and stabilising electricity supply. SA has not experienced load-shedding for more than four months. The last time SA enjoyed such a prolonged period of uninterrupted power supply was between March and July 2020, when load-shedding was suspended for 116 days.
On Wednesday, the SA Reserve Bank will publish the gross foreign exchange reserves for July. SA’s gross foreign exchange reserves were barely changed at $62.1bn in June.
A decline in gold reserves was outweighed by higher foreign exchange reserves, said FNB economist Mamello Matikinca-Ngwenya. Overall, changes were mainly driven by valuation and asset price adjustments, which were offset by foreign exchange payments made on behalf of the government.
Internationally, the US’s June trade numbers this week are expected to show a smaller trade deficit than in May.
“The deficit with China will likely widen based on trade data released by Beijing. China is also releasing its trade data [for July]. China’s trade data is anticipated to show another robust surplus for July. Amid a struggling property market, China has increasingly relied on exports to boost its economy,” said Solomon.
S&P Global will publish the final July PMIs for several major economies including China, the US and the UK.
BusinessLIVE > economy