Regional eXplorer (ReX) Update, 4^th Quarter of 2017

Please join us in celebrating another successful product update of the IHS Markit Regional eXplorer.

This update incorporates:

• a number of major data source publications
• quality checks to further improve the accuracy of the model

Also check out the technical note below as well as a glimpse of our ReX Publisher product.
 

Regional Perspectives: Global Outlook

The global economy finally broke out of the doldrums in 2017, putting to rest persistent fears of “secular stagnation.”

The best performance since 2010 was the result of more rapid growth in the US, Eurozone, and Japanese economies. Emerging markets also contributed to faster global growth, as some of the worst-hit economies (e.g., Brazil and Russia) emerged from recession.

The stage is set for sustained solid growth in the world economy in 2018. IHS Markit expects global growth of 3.2% in 2018, matching the growth rate of 2017 and well above the 2.5% rate of 2016. That said, the composition of growth is likely to change. The US economy will see a further pickup in growth, with or without a tax cut. On the other hand,growth in the Eurozone is predicted to have peaked in 2017. Similarly, the recent Japanese growth spurt looks set to fade. At the same time, the Chinese economy’s gradual deceleration is expected to continue.

The good news is that the recovery in the emerging world will likely be sustained. Unfortunately, there is no shortage of risks facing the world economy, but most are low-level threats. The most worrisome are policy mistakes either in the United States (e.g., a fiscal shock or a trade war) or China (e.g., a mismanaged deleveraging).

Regional Perspectives: South African Near-term Outlook

Stronger household spending is expected to support GDP growth prospects.

IHS Markit is of the view that South Africa’s GDP growth rate could average 0.9% during 2017, up from 0.3% recorded in 2016. The real seasonally adjusted annualized growth rate (SAAR) in Q3 is likely to repeat the 2.2% SAAR recorded in Q2. Preliminary indicators suggest that major categories such as wholesale and retail trade combined with mining and manufacturing production are expected to show a positive contribution to Q3’s growth performance. A slowdown in economic activity is nonetheless likely in Q4 as suggested by lackluster performances in the Standard Bank whole economy PMI, compiled by IHS Markit.

Households benefited from a slowdown in headline inflation, particularly food inflation and a 25 basis point cut in the Central Bank’s policy rate during Q2. A significant rebound in semi-durable household spending was recorded during Q2, with this category expected to remain resilient during Q3. Nonetheless, structural impediments, such as the high level of unemployment, the increase in households’ tax burden, weak consumer sentiment, and sticky high levels of household leveraging, will constrain the overall growth of household spending. The weakening of the rand exchange rate could furthermore increase overall import price inflation, particularly regarding domestic fuel prices, during Q4.

South Africa’s net trade position (exports minus imports) showed a significant drop during the second quarter following a sharp rebound in import demand. The temporary correction in international commodity prices and stronger rand exchange rate left the country’s terms-of-trade position less favorable during the second and third quarters. The commodity price rally has subsequently resumed, while a weaker currency could add to some export resilience during the fourth quarter of 2017. Stronger gains in household spending could nonetheless leave the net trade contribution to overall GDP less significant than previously expected.

Main data releases incorporated in this update

StatsSA Quarterly Labour Force Survey (Q3 2017)

The working age population increased by approximately 156 000 persons in the third quarter of 2017 compared to the second quarter of 2017. This resulted in an increase of 125 000 in the labour force and 31 000 in the number of those not economically active. The increase in the labour force in the third quarter of 2017 resulted in the labour market rates (unemployment rate, absorption rate and labour force participation rate) remaining unchanged from the second quarter of 2017.

Domestic Tourism Survey 2016

The Domestic tourism survey 2016 report released by Statistics South Africa today shows a pattern of decline in domestic tourism over the past two years, with the total number of day trips decreasing from 44,3 million in 2015 to 39,4 million in 2016. Overnight trips decreased from 45,4 million in 2015 to 43,0 million in 2016. 

An actual total expenditure on domestic overnight trips increased from R62 billion in 2015 to R63 billion in 2016. A different pattern was seen in day trips with a decrease in expenditure from R25 billion in 2015 to R23 billion in 2016. This increase in expenditure between 2015 and 2016 on overnight trips was largely driven by increased spending in the higher living standard measure subgroup (LSM 8–10), as individuals and households from the lower living standard measure groupings were significantly less likely to travel in 2016 than in 2015.

The biggest spending during day and overnight trips was on domestic transport, shopping, food and beverages. Most of the money spent during the most recent day trips was spent in Gauteng, whereas most overnight expenditure occurred in KwaZulu-Natal.

Technical Note

F1 functionality when offline

While ReX can be fully utilized offline, some functionality does require an internet connection. One function in particular is that of using the F1 key on any specific Region.

This will allow a new window to open with additional information to appear on the specific region selected.

When an active internet connection is present, two buttons will appear below the map of the region, "Show Interactive Map"  and "Open in Browser". 

If there is no internet connection these two buttons will not appear. 

ReX Publisher: taking our ReX data a step further

ReX Publisher generates automated research documents based on the latest ReX data available.  You can choose between a 3-page quick overview, or full content report complete with descriptive charts, data summaries and interpretations.

For more information, go to http://www.rexpublisher.co.za, or contact Johan.Boshoff@ihsmarkit.com

As always, we welcome your comments and feedback.  We hope you enjoy this update.

Best,
The IHS Markit ReX team