South Africa: data gap can be bridged for now - Capital Economics
Africa Economics

South Africa: data gap can be bridged for now

Africa Economics Update
Written by Virag Forizs

South Africa’s ongoing three-week lockdown means the statistics agency won’t be publishing or collecting data during this time. In this Update, we explain what other data we should look at, what would happen if the lockdown is extended and the implications for the GDP figures and central bank policymaking.

  • South Africa’s ongoing three-week lockdown means the statistics agency won’t be publishing or collecting data during this time. In this Update, we explain what other data we should look at, what would happen if the lockdown is extended and the implications for the GDP figures and central bank policymaking.
  • With the lockdown in place until April 16th, South Africa’s statistics bureau, Stats SA, announced that the figures due in April (including the activity and inflation data) will be published with a delay of up to five weeks. (For full details of upcoming data releases, please refer to Table 1.)
  • As it happens, the data that would be released by Stats SA this month wouldn’t have told us much. The hard activity data originally due out this week and next (now postponed to mid-May) were for the month of February, which would miss all of the economic hit from efforts to contain the coronavirus. We would, in any case, be paying more attention to timelier activity figures (which aren’t compiled by Stats SA).
  • At face value, the survey indicators for last month don’t look particularly bad. The manufacturing PMI (compiled by the Bureau for Economic Research) actually rose in March. And the fall in the South African Chamber of Commerce and Industry’s business confidence measure to a seven-month low (see Chart 1) wasn’t as dramatic as might have been expected. But these surveys probably don’t capture the full effects of the lockdown and, in the case of the PMI, statistical quirks are at play too. (See here.)
  • Lower level sectoral indicators suggest that Covid-19 is dealing a severe blow to the real economy. In the retail sector, for example, South Africans started avoiding cinemas before the lockdown even began. (See Chart 2.) Car sales tumbled in March. (See Chart 3). And electricity demand, published by Eskom, dropped by 14% in the first week of the lockdown as factories and mines shut down. The corresponding figures for April, due in early May, will almost certainly be much worse. (See Table 1 again.)
  • So long as the lockdown ends on 16th April, there shouldn’t be additional problems in Stats SA’s publications. Surveys are generally collected shortly after the end of each month. Those for March will arrive a bit late; those for April shouldn’t be interrupted. If, however, the lockdown is extended for a significant period, there would be more disruptions. Surveys for April may not be collected at all or may be compiled retrospectively.
  • One consequence is that the GDP data could be distorted. In particular, when measuring GDP components, monthly Stats SA surveys are used as building blocks for value added in manufacturing, mining and retail trade on the production side and for household consumption on the expenditure side.
  • Of course, in these circumstances, some of the other sources that Stats SA relies on to compile the data (e.g. the Treasury or the South African Revenue Service) might stop collecting data too. And there would be broader questions about the reliability of businesses’ responses. One risk is that this could cause the GDP figures to understate the knock-on effects of the virus. That might prevent policymakers from acting sufficiently to prevent corporate insolvencies and problems in banks. (See our Global Economics Update.)
  • Meanwhile, policymakers at the Reserve Bank might end up flying (partially) blind. Consumer price figures for April will only be released on 20th May, a day before the next MPC meeting. If the lockdown continues, that release might be delayed or cancelled. Were that to happen, we suspect that the Reserve Bank would pay most attention to the prices component of the PMI as well as break-even inflation expectations derived from inflation-linked bonds.
  • The SARB did cut interest rates aggressively last month – despite a rise in inflation expectations (see Chart 4) – and our central view is that it will lower rates further (by an additional 75bp). However, a sharp rise in inflation (if it’s released), expectations or the PMI price component might prompt policymakers to pause for breath at next month’s meeting.

Chart 1: Business Confidence Index & GDP

Chart 2: Box Office Receipts (ZAR, % y/y)

Chart 3: Auto Sales (% y/y)

Chart 4: Inflation Expectations & Key Policy Rate (%)

Sources: Stats SA, SARB, BER, SACCI, Refinitiv, Capital Economics

Table 1: Revised Data Release Schedule

Date

Country

Release/Indicator/Event

Period

Time (BST)

Data Provider

29th Apr

SA

Consumer Price Index

Mar

(9.00)

Stats SA

30th Apr

SA

Trade Balance (SAAR, ZAR)

Mar

(13.00)

South African Revenue Service

SA

Budget Balance (SAAR, ZAR)

Mar

(13.00)

South African Reserve Bank

1st May

SA

Absa Manufacturing PMI

Apr

(10.00)

Bureau for Economic Research

SA

NAAMSA Vehicle Sales

Apr

(13.00)

NAAMSA

7th May

SA

Electricity Production

Mar

(12.00)

Stats SA

1st – 8th May

SA

SACCI Business Confidence Index

Apr

SACCI

12th May

SA

Quarterly Labour Force Survey

Q1

(10.30)

Stats SA

SA

Manufacturing Production

Feb

(12.00)

Stats SA

SA

Manufacturing Production

Mar

(12.00)

Stats SA

13th May

SA

Retail Sales

Feb

(12.00)

Stats SA

SA

Retail Sales

Mar

(12.00)

Stats SA

14th May

SA

Mining Production

Feb

(10.30)

Stats SA

SA

Mining Production

Mar

(10.30)

Stats SA

20th May

SA

Consumer Price Index

Apr

(9.00)

Stats SA

21st May

SA

Interest Rate Announcement

29th May

SA

Trade Balance (SAAR, ZAR)

Apr

(13.00)

South African Revenue Service

SA

Budget Balance (SAAR, ZAR)

Apr

(13.00)

South African Reserve Bank

Sources: Bloomberg, Capital Economics


Virág Fórizs, Emerging Markets Economist, virag.forizs@capitaleconomics.com