Economics Weekly (25th of November 2016)

Week ahead

· SA: Headline inflation should average 6.4% in the last quarter of 2016 before decelerating back within the central bank’s target in 2Q17.
· SSA: Mozambique GDP growth is starting to give way, slowing to a seasonally adjusted 1.5% y/y in 3Q16. Zambia headline inflation fell to 8.8% y/y largely due to base effects. Nigeria deepened further into recession with GDP contracting –2.24% y/y.
· Global: The US housing market remained at very healthy levels, despite new home sales decreasing –1.9% m/m. Japan climbed out of deflationary territory, Headline inflation increased 0.1% y/y. The economy also posted a sizable trade surplus of JPY 497.6 billion.


While a ratings downgrade may be pushed out to mid-2017, owing to treasury’s additional fiscal consolidation measures announced in the MTBPS, FNB continues to believe that it is inevitable as National treasury’s flexibility remains constrained by weak economic growth.

As such fiscal targets set out in the MTBPS may be missed. Furthermore, the financial positions of state owned enterprises remains weak, and their collective debt could potentially push South Africa’s debt -to -GDP ratio over the threshold set by S&P. Also, rating agencies will likely act if political dynamics threaten policy implementation. Opinions around the national minimum wage (NMW) seem to differ at this point, what will be important for the rating agencies is whether jobs are lost due the implementation.

The week ahead hosts a number of data releases. Private sector credit extension is up first. Credit demand by households should have been constrained by tighter lending stands and high servicing costs while weak business confidence should have negatively impacted corporate credit uptake. Business confidence should have deteriorated in 4Q16 given that the uptick in 3Q16 was motivated by the outcome of the elections which was viewed as positive. Political uncertainty and no signs of an improvement in GDP should have weighed on sentiment. Trade statistics, the Barclays PMI and Naamsa vehicle sales will also be released over the week.

Read more here: Economics Weekly 25th November 2016