Producer inflation set to continue dropping
By Claire Bisseker - Apr 24th 2017, 08:56
Private-sector credit extension figures are expected to reflect the poor state of the consumer
Trade data, producer price inflation and private-sector credit extension data are scheduled for release this week.
Though the trade account is likely to affect another surplus, the other releases are expected to continue their downward trend, reflecting the weak state of the economy.
Statistics SA will release the producer price index (PPI) for March on Wednesday.
The PPI declined markedly from 5.9% year on year in January to 5.6% year on year in February. Most economists expect this decelerating trend to continue, helped by the strong rand and food-price deflation as SA recovers from drought.
The food category carries the largest weight in the PPI basket, accounting for just more than 25%.
BNP Paribas Securities economist Jeff Schultz is looking for headline PPI to come in at 5.3% year on year in March on softer manufactured food prices, the decline in domestic fuel prices in March and the slight weakening of the purchasing managers’ index price index.
On Friday, Stats SA will release private-sector credit extension figures for March. These are expected to reflect the poor state of the consumer.
BNP Paribas Securities expects headline public sector credit extension to have declined to 4.7% year on year in March from 5.3% in February.
Its forecast is underpinned by the fact that consumer confidence and demand remain weak, lending standards are tight and the economy is creating few jobs.
Investec economist Kamilla Kaplan expects private-sector credit extension to have climbed slightly in March but to have averaged a weak 5.5% year on year over the first quarter as a whole, marking a further slowdown from the average growth of 6.9% year on year that occurred in 2016 and from 8.9% year on year in 2015.
"Depressed business and consumer confidence, as well as weak economic activity, have contributed to the suppressed rates of credit growth," she said.
The South African Revenue Service will release the latest trade data on Friday.
Following a surplus of R5.2bn in February, the trade account is expected to have incurred another, albeit smaller, surplus in March. The trade account has improved in recent months as imports have continued to contract on weaker domestic demand while the global recovery has helped to lift export growth.
Kaplan is forecasting a March surplus of R7bn, which would take the net surplus for the first quarter to R1.5bn. This would be a big improvement on the R24.3bn deficit SA incurred in the final quarter of 2016.
"The improvement in the trade position … reflects the effects of relatively weak consumption and investment activity which have contributed to suppressing import growth. Concurrently, export growth has strengthened in line with the lift in commodity prices and in global demand," she said.
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