South Africa news flow and changes to the CPI Index

First, the National Treasury will today at noon London time publish National Government budget data for December. We expect that the budget recorded a seasonal surplus in the month, of ZAR20bn. If this proves correct, then the annualized consolidated budget deficit would widen to an estimated 3.8% of GDP from 3.5% recorded in November, according to our estimates.

Second, the Reserve Bank will tomorrow at 6:00am London time publish monetary aggregate data for December. Domestic private sector credit growth likely stayed low, near a nominal 5% yoy, according to our estimates.

Third, the South African Revenue Service will tomorrow at noon London time publish external merchandise trade data for December. We expect that the trade account recorded a seasonal surplus in the month, of ZAR10bn. If this proves correct, then the annualized trade surplus would improve to an estimated 0.5% of GDP from 0.4% recorded in November, according to our estimates.

Fourth, the National Automobile Association (NAAMSA) of South Africa will on Wednesday (1 February) publish new vehicle unit sales data for January. In December 2015, sales (non-seasonally adjusted) were down 10% mom and down 15% yoy. For calendar 2016, unit sales were 11% lower than in 2015.

Fifth, the Bureau for Economic Research (BER) will on Wednesday at 9:00am London time publish its PMI for January. The index remained below 50 for five consecutive months to December 2016.

Sixth, Statistics South Africa will on Thursday (2 February) at 11:00am London time publish electricity production data for the month of December. In November production volumes (in seasonally adjusted terms) were down 0.4% mom, following growth of 1.5% in October. The sector looks likely to have been a positive contributor to GDP growth in the 4Q 2016, according to our estimates. On Friday (27 January) Statistics South Africa published new weights for the consumer price index. We think that there may be some good news for inflation in 2017 given the changes.

First, the ‘Food & NAB’ category increased to 17.24% from 15.41%. If we are correct in our expectation of a decline in domestic agricultural prices this year, then the deflation impact on headline CPI inflation could be more pronounced. Second, the ‘Transport’ category declined to 14.28% from 16.43%. Similarly, if our expectation of a weaker ZAR and higher oil prices proves correct, then the inflation impact on headline CPI could be less severe.