South African Economy Probably Contracted: Week Ahead

By Nasreen Seria and Mike Cohen

Feb. 23 (Bloomberg) -- South Africa’s economy, the continent’s biggest, probably contracted for the first time in a decade in the fourth quarter as the deepening global recession cut export demand.

Gross domestic product fell an annualized 1.5 percent in the final three months of last year compared with the third quarter, according to the median estimate of 20 economists surveyed by Bloomberg. Statistics South Africa will publish the report at 11:30 a.m. in Pretoria tomorrow.

Recessions in the U.S., Europe and Japan, which together buy 60 percent of South African exports, are undermining mining and manufacturing production and adding to job losses in a country where unemployment is 23 percent. Figures this week that are likely to show inflation eased to its lowest in a year may give the Reserve Bank room to accelerate interest rate cuts.

The fourth quarter economic growth figure “will be negative” as a result of the global slowdown and the delayed impact of previous interest-rate increases, said Rian le Roux, chief economist at Old Mutual Investment Group, the country’s largest private money manager. “If the numbers are quite bad” the central bank may cut rates by 1 percentage point before the next scheduled meeting of its Monetary Policy Committee in April.

Compared with a year ago, the economy probably grew 1.4 percent in the fourth quarter, according to 20 economists surveyed by Bloomberg.

MPC Meeting

On Feb. 6, central bank Governor Tito Mboweni said he may convene an early MPC meeting if economic growth is slowing more than expected. The MPC lowered the benchmark interest rate by 1 percentage point to 10.5 percent on Feb. 5, the biggest cut in more than five years.

Inflation probably slowed to an annual 7.5 percent in January from 9.5 percent in the previous month, according to the median estimate of 18 economists surveyed by Bloomberg.

Producer-price inflation probably eased to 9.5 percent in January from 11 percent in the previous three months, according to the median estimate of 16 economists. The report is due to be published on Feb. 26.

Credit growth may have slowed last month to 12.5 percent from 14 percent, according to the median estimate of 14 economists, adding to expectations of interest rate cuts. The central bank will publish the credit figures on Feb. 27.

The fourth-quarter unemployment report, due to be published this week, has been delayed until March 2, the statistics office said on its Web site.

Earnings Reports

Murray & Roberts Holdings Ltd., the country’s largest construction company, may post first-half profit of as much as 35 percent, it said on Feb. 13. The earnings will be published on Feb. 25.

Massmart Holdings Ltd., South Africa’s biggest food and goods wholesaler that is due to publish first-half earnings on Feb. 26, may say profit rose as much as 15 percent, the company said on Feb. 19. Nedbank Group Ltd., the lender controlled by Old Mutual Plc, is scheduled to publish annual earnings Feb. 26.

The rand fell 2.3 percent against the dollar last week, to close at 10.1205. Government bonds declined. The yield on the benchmark 13.5 percent security due September 2015 rose six basis points in the week, to 7.99 percent. Yields move inversely to bond prices.

Last week, the benchmark FTSE/JSE Africa All Share index fell 6 percent to close at 19,402.59. BHP Billiton Ltd., the world’s largest mining company, dropped 6.9 percent to 169.50 rand while Anglo American Plc, the fourth largest, plunged 17 percent to 153.50.

Event                                             Date
African Rainbow Minerals Ltd. first-half earnings Feb. 23
Tongaat-Hulett Ltd. annual earnings               Feb. 23
Exxaro Resources Ltd. annual earnings             Feb. 24
Santam Ltd. first-half earnings                   Feb. 24
Gross domestic product data                       Feb. 24
Murray & Roberts Holdings Ltd. first-half profit  Feb. 25
Consumer-price inflation                          Feb. 25
Nedbank Group Ltd. annual earnings                Feb. 26
Massmart Holdings Ltd. first-half earnings        Feb. 26
Grindrod Ltd. annual earnings                     Feb. 26
Liberty Holdings Ltd. annual earnings             Feb. 26
Mondi Group Ltd. annual earnings                  Feb. 26
Producer-price inflation                          Feb. 26
African Oxygen Ltd. annual earnings               Feb. 26
M3 and Private Sector Credit data                 Feb. 27
Trade data                                        Feb. 27

To contact the reporters on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net; Mike Cohen in Cape Town at mcohen21@bloomberg.net.