SA: The week started off on a positive note, beginning with the announcements late Friday by Fitch and Moody’s that they were keeping South Africa’s sovereign credit rating at investment grade.
SSA: Lesotho headline inflation continued to edge downwards to 5.7% y/y in October from 6% in September resulting in the central bank keeping the bank rate unchanged at 7%.
Global: OPEC agreed to reduce output by 1.2 million barrel per day (mbpd) bringing production to a total of 32.5 mbpd effective from January next year. Manufacturing PMI’s remained elevated in developed markets in November as China (51.7), the US (53.2) and the Eurozone (53.7) trended higher, while the UK edged slightly lower (53.4) although still displaying impressive gains.
Next week sees the all important release of 3Q16 GDP on Tuesday, and October mining and manufacturing production on Thursday. The FNB /BER consumer confidence index for 3Q16 will also be released on Thursday.
Mining production volume rose 3.4% y/y in September as a result of firmer commodity prices and fewer work stoppages. FNB expects that October will deliver a similar expansion given the –3.3% y/y contraction in October 2015, providing a lower base. As with previous months, PGM production is likely to provide a lift after contracting by a monthly average of –21.3% y/y (seasonally adjusted) between June 2015 and May 2016.
Manufacturing production was flat year-on-year in September and contracted –0.1% on a seasonally adjusted basis. Weaker business activity and sales orders in the October PMI, which fell from 48.5 to 45.9 suggest that a contraction is likely in the month. FNB’s GDP expectation is for a 0.9% y/y expansion and growth of 1.2% q/q saar. The first three quarters of year-on-year growth average 0.5%, and while FNB is not yet sufficiently convinced to raise their 0.2% GDP growth forecast for 2016, FNB acknowledges upside risk to their view.
Read more here: FNB Economics Weekly 2nd December 2016