The FNB/BER CCI plunged into negative territory in 3Q19 (-7), from +5 points during the second quarter. The collapse in the headline CCI reading in third quarter of 2019 is in line with poor domestic economic conditions, which have been followed by exceptionally high levels of unemployment and weak disposable income growth. In October the seasonally adjusted Absa PMI increased to 48.1 index points from the revised 45.1, and new vehicle sales recorded their second y/y increase in 2019 of 0.2% y/y in October to 51 978 units. Manufacturing production decreased by 2.4% y/y in September.
Minister Tito Mboweni delivered the MTBPS on Wednesday, which highlighted that chronically poor economic growth is putting excessive pressure on tax revenue collection, while expenditure demands continue to mount as the government continues to offer assistance to ailing state-owned entities - particularly Eskom. We are of the view that the likelihood of a downgrade to sub-investment grade over the coming months has risen substantially. Unemployment nudged up to 29.1% in 3Q19, from 29% in 2Q19. The headline PPI for final manufactured goods slowed to 4.1% y/y and SA's trade surplus widened to R5.16 billion in September.
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