Good recovery data could be an early Christmas present for South Africa

Statistics South Africa is scheduled to release its GDP numbers for the third quarter on Tuesday (8 December), with analysts hopeful that the data will point to signs of a strong rebound after the country’s coronavirus lockdown.

The Bloomberg market consensus is for a robust initial rebound of 55% q-o-q (annualised) after the lockdown induced 51% crash in Q2.

Based on current data, Stellenbosch’s Bureau for Economic Research (BER) is much more optimistic and believes that the rebound could be in excess of 60%.

“Based on the high-frequency data available for the third quarter and a number of assumptions on the services sectors, we are much more optimistic with a figure of 64% pencilled in,” it said in a research note on Monday.

“As in Q2, we acknowledge a large amount of uncertainty surrounding the GDP outcome, including the extent of possible revisions to Q2 that may have spillover effects to the Q3 print.”

However, the BER said that depending on the strength of the Q3 outcome, it is likely to result in forecast revisions for the full-year GDP contraction in 2020.

Another release that is likely to attract some attention this week is the Q3 current account balance.

“Based on the large trade surpluses achieved in recent months, the consensus is for a blockbuster current account surplus of 3.7% of GDP after a 2.4% of GDP deficit during Q2,” the BER said.

“If such a large surplus is achieved, or especially if it is even larger than expected, it is likely to add fuel to the fire of those investors who have turned more positive on the rand exchange rate, at least versus a weakening US dollar.”

In currency markets, the rand exchange rate has continued to strengthen from the previous week amid a weaker dollar and improved global risk appetite for higher-yielding emerging markets.

However, the local currency lost notable ground against the euro and to a lesser extent the pound. This emphasises the impact of a weaker US dollar in the recent buoyant rand performance, the BER said.

On Monday, the rand started the day at R15.24 to the dollar, R18.47 to the euro and R20.44 to the pound.

Read: How Covid-19 will impact December leave for workers in South Africa