Hard activity data from South Africa released this week point to continued weakness in the economic recovery in August despite the easing of containment measures.
- Hard activity data from South Africa released this week point to continued weakness in the economic recovery in August despite the easing of containment measures.
- Activity data published by Stats SA today showed that retail sales rose by 4.0% m/m in August, a stronger outturn than even the most optimistic forecast collected by Bloomberg (of 3.0% m/m). Figures released earlier in the week showed that mining and manufacturing output recovered at a slower pace in August compared to July, increasing by 6.8% m/m and 3.6% m/m respectively.
- Even as activity continued to recoup its losses from Q2, output in August remained depressed. Manufacturing production was down 10.8% y/y in the middle of Q3. (See Chart 1.) And mining output and retail sales were 3.0-4.5% lower than in August 2019. (See Charts 2 & 3.) It seems that loosening containment measures, from lockdown level three down to two in mid-August, did not result in a significant boost to activity.
- Overall, the figures suggest that GDP expanded by around 24% q/q on a seasonally adjusted, annualised basis in August. Following a 51% q/q saar contraction in Q2, that would be far from a robust recovery in output. And more timely survey data do not point to a strong September either. Car sales were still down by 31.2% y/y last month. (See Chart 4.) And the South African Chamber of Commerce and Industry’s measure of business confidence dropped back in September.
- A string of data releases suggesting a weak rebound in activity will probably strengthen the arguments of those in the cabinet advocating for a more ambitious recovery plan and/ or less harsh austerity in the coming years. We’ll know more when President Cyril Ramaphosa unveils the economic recovery plan later this week, and Finance Minister Tito Mboweni presents a budget update towards the end of October.
Chart 1: Manufacturing Production (% y/y)
Chart 2: Mining Production (% y/y)
Chart 3: Retail Sales (% y/y)
Chart 4: Car Sales (% y/y)
Sources: Stats SA, Refinitiv, Capital Economics
Virág Fórizs, Africa Economist, firstname.lastname@example.org