South African manufacturing production contracted by -2.6% y/y in November (prior: +0.9% y/y). The decline was driven by most of the manufacturing categories reporting worse output. Notably, vehicle manufacturing output declined for a seventh consecutive month in November (-11.5% y/y) amidst weak export demand for vehicles. A weaker manufacturing PMI reading for November hinted that production levels would be weaker. Despite interest rate cuts, an end of load-shedding and optimism around the formation of the GNU, manufacturing production remains well off its 2019 levels. The de-industrialisation narrative has become more prominent this week, as ArcelorMittal announced the closure of its long-steel business in South Africa, S&P Global’s SA PMI for December moved back into contractionary territory, the December Absa manufacturing PMI dropped further into contractionary territory in, and last manufacturing production data highlighted further decline of output.

Today, the December US employment report will draw the market’s attention, given the recent reduction in US Fed rate cut risk we have seen. Of the releases, the nonfarm payrolls data and the unemployment rate will attract particular interest. Expectations are for hiring to have slowed in December following the strong November numbers. However, there is the risk of a topside surprise in payrolls, should hiring further rebound from the October lows caused by hurricanes and strikes. Should the payrolls data come in softer, markets would add to rate cutting risks. But with Fed Funds Futures pricing in less than a 10% chance of a rate cut for January, markets would only bring forward a credible chance of another cut in March or May, from fulling pricing the next 25bp cut in June.