Our proprietary market strength indicators show that demand is now moderating, following a strong rebound in 2H20 and into 2021. Mortgage extension continues to grow at a faster pace, while loan-to-price ratios are trending lower. Weaker-than-expected 2Q21 labour market data suggests that longer-term demand fundamentals will likely take longer to recover to pre-pandemic levels.
Included in the consumer price index (CPI) publication are measures of CPI by expenditure decile. These measures provide an appreciation of the consumer inflation experience of households with various expenditure profiles, given their spending capacity. Seasonally adjusted mining production is up 4.1% m/m in July. Retail sales volumes kicked off 3Q21 on a negative note, declining by 0.8% y/y in July.
Preliminary GDP growth for 2Q21 came in at 1.2% q/q. While the economy has been gradually recovering from the pandemic-induced slump in 2Q20, the recovery is fragile and uneven across sectors. The FNB/BER Consumer Confidence Index (CCI) partially recovered to -10 index points in 3Q21. Total manufacturing declined by 4.1% y/y in July.
On Tuesday Stats SA will release revised GDP estimates for 1Q21 and preliminary GDP estimates for 2Q21. This follows last week’s publication of the benchmarked and rebased GDP figures. Private sector credit extension turned moderately positive in July, recording 0.6% y/y. Domestic vehicle sales recovered from the economic disruptions caused by the unrest in July, recording 24.6% y/y in August, and the trade surplus for July amounted to R37 billion.
We expect economic growth to rebound strongly to at least 4.1% (versus our earlier forecast of 3.7%) in 2021 after contracting sharply by 7.0% in 2020. The more accommodative monetary policy stance along with the elevated terms of trade and economic growth rebound from South Africa's major trading partners underpin our growth rebound.
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