Early evidence suggests that the coronavirus and South Africa’s lockdown measures are taking a heavy toll on the economy and supports our view that the economy will decline sharply over the year as a whole. Our forecast is for a contraction of 11.0%, which puts us at the bottom of the consensus range.
- Early evidence suggests that the coronavirus and South Africa’s lockdown measures are taking a heavy toll on the economy and supports our view that the economy will decline sharply over the year as a whole. Our forecast is for a contraction of 11.0%, which puts us at the bottom of the consensus range.
- Long delayed activity figures published by Stats SA suggest that the economy was in a bad shape at the end of Q1. Mining output fell by 19.9% m/m in March and manufacturing production was down by 1.2% m/m. Retail sales figures out next week will give us a better sense of how Q1 shaped up. For now, we think that the economy probably contracted by about 3-4% on a quarter-on-quarter, seasonally adjusted basis.
- But that is, of course, old news – the lockdown only came into force on 27th March – and early indicators for Q2 paint a very gloomy picture. Output in the mining sector, which was one of the sectors most severely impacted by lockdown measures, plunged by 30.4% m/m in April. (See Chart 1.)
- It may be difficult to get a full gauge of the economy’s performance in April. Stats SA’s publication calendar suggests that April manufacturing and retail sales won’t be published, which could lead to distortions in GDP data. But available survey figures point to a severe hit to output; the business activity component of the manufacturing PMI is consistent with a 35% 3m/3m fall in production in April. (See Chart 2.)
- Some activity seems to have recovered last month. The PMI rebounded in May and, while the FNB/BER Business Confidence Index for Q2 (actually conducted in the second half of May) hit a record low, it’s consistent with a ‘modest’ 5% y/y fall in GDP. (See Chart 3.)
- But we suspect that activity was weaker last month than these surveys suggest. Losses in income and employment are surely weighing on the recovery in domestic demand. And consumers seem to be cautious even though restrictions are easing. Routing data from Apple show that journeys by South Africans are only picking up slowly. (See Chart 4.) The fall in GDP this year looks set to reach historic proportions.
Chart 1: Mining Output (% m/m)
Chart 2: Manufacturing PMI & Production
Chart 3: FNB/BER Business Confidence & GDP
Chart 4: Apple Maps Routing Requests*
Sources: Stats SA, SARB, Refinitiv, Capital Economics
Virág Fórizs, Africa Economist, email@example.com