South African manufacturing production data published yesterday showed the sector’s output grew by +1.7% y/y in July after contracting by a notable -5.5% y/y (revised) in June. The latest growth rate exceeded consensus estimates of 0.9% y/y. Overall, the latest improvement in manufacturing production is marginally encouraging, but there has, as yet, been no sign of a resurgence in production driven by an end to load-shedding or GNU inspired confidence. The broader reality is that manufacturing output is stagnating at roughly -5.0% below pre-virus production levels, with no clear shift in trend. Pragmatic policymaking is needed if South Africa’s deindustrialisation trend and structural inefficiencies are to be adequately addressed. Looking ahead, August’s notably contractionary PMI print indicates that the recent improvement in manufacturing output growth is unlikely to be sustained in next month’s print.
Today, the focus will shift back to US economic data, with the closely-watched US CPI data for August set to provide fresh inspiration for trade driven by the Fed’s policy outlook. Consensus expectations as per Bloomberg surveys point to the fourth consecutive inflation print roughly in line with the Fed’s 2.0% target. The consensus is that headline inflation likely ebbed to 2.6% y/y in August, down from 2.9% y/y the prior month, solidifying the disinflation narrative and easing policymakers’ concerns on the price front. Meanwhile, in month-on-month terms, the CPI likely rose 0.2% in August, unchanged from July. More telling for underlying price pressures, the core monthly CPI likely continued to grow just 0.2% as used cars and discretionary consumer-goods prices pushed down core-goods inflation. Still, core inflation is expected to remain at 3.2% on a year-on-year basis.