Podcast: April likely the weakest point in SA’s COVID-19 recession

In this podcast, exclusively for BER clients, we discuss the first data available for May (mainly the Absa manufacturing PMI) and reflect back on April. To listen to the podcast, navigate to the "webinars" tab under "my account"

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The FNB/BER Civil Confidence Index rose for the fourth straight quarter in 2020Q1. However, at 24, the index still signifies that the majority of civil contractors are dissatisfied with prevailing business conditions.

After plunging to an all-time low of a mere 5.1 index points in April, the business activity index of the Absa PMI survey rose sharply to 43.2 index points in May. The increase was driven by most factories returning to production (albeit at reduced capacity) during May, after the Level 5 nationwide lockdown brought manufacturing output to a near standstill in April. Many respondents reported that production was still well below normal capacity in May, but nevertheless higher than that (in some case zero production) recorded in the previous month.

The RMB/BER BCI slumped by eight points to 18 in the first quarter of 2020 - a 21-year low. Persistent demand weakness, load shedding, bailouts of struggling SOE’s, the deterioration in the government’s finances and the spreading of the coronavirus around the globe all played a role. January’s 25 basis point interest rate cut was a small positive, but not enough to compensate for the negative developments. Since the survey was completed in early March, things have gone from bad to worse on the global front. The RMB/BER BCI will in all likelihood continue to trend lower in the period ahead, with obvious negative consequences for private sector fixed investment.

The FNB/BER Consumer Confidence Index (CCI) declined by a further 2 points. The time-to-buy sub-index plunged to a 33-year low. High-income earners’ confidence dropped to a 20-year low. The low confidence of the high-income group does not bode well for retail sales in general and durables goods in particular. Non-durable goods will continue to benefit from the stable confidence of low- and middle-income earners.