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Data expected to show uptick in vehicle sales

The Reserve Bank’s surprise July interest rate cut is bearing fruit and will be an underlying factor in positive vehicle sales expected this week.

After a dismal performance in 2016 as the economy battled the effects of a crippling drought, vehicle sales have expanded year on year over the past three months.

Mamello Matikinca, FNB senior economist, said the September print for vehicle sales to be released on Monday was expected to continue on a positive trend. “The 25-basis-point cut in July, as well as a very weak base, should lend support to the numbers for the balance of the year,” she said.

This may be underpinned by a modest recovery in household appetite for credit.

Data published by the Bank last week showed a 3.4% rise in household credit extension in August from 3.3% in July.

Corporate sector extension improved slightly. This supports the positive reading of the Bank’s leading business cycle indicator last week on the back of an uptick in building plans passed, business confidence and vehicle sales. Confidence in the manufacturing sector may, however, continue to lag behind positive global manufacturing performance.

The Absa purchasing managers index, also to be published on Monday, was expected “to languish at levels seen over the past three months of between 42 and 46”, Matikinca said.

A reading below the 50 neutral mark indicates possible contraction in the sector.

In data published last week, manufacturing was one of the largest contributors to the 34,000 jobs lost in the formal sector during the second quarter of 2017.

Tumisho Grater, economic strategist at Novare Actuaries and Consultants, said the latest data indicated that key components such as new sales orders continued to struggle.

The Standard Bank index, to be published on Wednesday, will provide further clues. This survey, however, is of industries across the economy.

Also on Wednesday, the Bank will release its monetary policy review, which reports on the domestic and international developments that have affected inflation and SA’s monetary policy stance.

On Friday the release of gold and foreign exchange reserves for September will round off the week’s important data.

speckmana@businesslive.co.za

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