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Standard Bank Group
14 June 2019

Better data eases recession fears

  • Recent monthly data has eased concerns about a technical recession now being imminent in Q2, especially after very poor Q1 GDP.
  • Nevertheless, we foresee a 25 bps rate cut in Q3 as well as a viable turnaround plan for Eskom. Therefore, SA in H2 and beyond should see some growth.
  • The risks, however, remain to the downside, and global growth is unlikely to support SA’s growth.
  • Domestic business confidence is still very low; in Q2, 72% of the BER survey respondents assessed SA business conditions as still unsatisfactory. Also, most of the sectors surveyed remained in negative territory in that quarter.
  • Encouragingly, SA wholesale trade sales grew 5.5% y/y in April (March: a contraction of 2.8%). Seasonally adjusted, wholesale trade sales grew 1.8% m/m, from 1.2% m/m. This directly in the wake of the recently fairly good monthly electricity production, manufacturing production, retail sales, and motor trade data.
  • However, mining production fell 1.5% y/y in April after declining 0.7% y/y in March; new vehicle sales fell 5.7% y/y in May from just 0.7% y/y growth in April; and PMI indicators remained in contraction. Nevertheless, despite the eventual Q2 GDP outcome perhaps incurring a recession, we’d still foresee some growth in H2 and further out.

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