Economic comment

GDP rebounded by 7.9% q/q in SA terms to -1.5% y/y from -8.4% y/y in 2Q20. As we expected, the recovery was driven mostly by private consumption (+0.4% y/y vs -10.8% y/y in 2Q20) and by foreign demand (net exports contributing +1.7 pp to GDP growth), while investments remained dented (-9.0% y/y vs -10.7% y/y in 2Q20). In 4Q20 the GDP growth will go down again due to the second bout of epidemic and the renewed lockdown. We are expecting the 4Q20 GDP to go down by about 4% y/y, mostly due to weaker private consumption. For 2021 we are hoping for a marked recovery in 2H21, while 1Q may be still subdued due to recurring pandemic in the winter season. While the third round of lockdown is still possible, the risk of further waves of the epidemic in 2H21 seem to be diminishing given positive vaccine news.

October retail sales contracted by 2.3% y/y, somewhat stronger than expected (we: -0.6%, market: -0.7%) and versus +2.5% y/y in September. A slowdown was widely expected due to resurgence of pandemic restrictions in October. Thus, in November retail sales are likely to slow down even further. Results of companies employing 50+ improved in 3Q20, mainly thanks to cost-cutting amid falling revenues, while investment improved somewhat versus 2Q20, but mostly due to strong rebounds in a few sectors. Construction output declined in October a bit more than expected (-5.9% y/y), but much less than in September (-9.8%).

Industrial output slowed down in October to 1.0% y/y from 5.9% y/y in September, in line with our and market expectations. In our view this slowdown was mostly due to calendar effects (-1 working day in annual terms vs +1 in September) and the effects of renewed restrictions were minor. We are expecting industry to remain relatively robust to the second wave of Covid infections, as the global reaction is less harmful to economic activity. Still, sectoral business sentiment indexes dropped severely in many cases in November, both their current conditions and expectations components. PPI surprised to the upside.