On the domestic data front, the producer price inflation print for July will be released on Thursday, and should be watched closely for a leading view on the direction of consumer inflation. June’s unchanged PPI reading of 4.6% y/y indicates that price pressures have eased and are stabilising around the mid-point of the SARB’s target band (3-6%). However, there was another acceleration in producer price inflation for food. While overall food PPI remains relatively subdued (4.0% y/y in June), an ongoing acceleration suggests there will be some impact on future consumer prices. According to Bloomberg’s consensus estimate, July’s print is expected to slow to 4.5% y/y. Looking further down the line, with global fuel prices having come off this year’s highs amid a stronger ZAR, local petrol prices are set to decline. Which will help to further ease inflationary pressures. An ongoing stabilisation in headline PPI is welcome.
On Friday, an update on domestic private-sector credit growth will be released. Credit demand is a key determinant of economic cycles; therefore, any acceleration or slowdown in demand is closely watched. June continued a recent trend where faster corporate credit growth has balanced slower household credit demand due to tighter lending standards. June’s uptick underscored the resilience of the credit cycle, even as it remains weak amidst depressed confidence and numerous economic headwinds. Still, the credit cycle remains weak, and the upcoming print will likely reinforce this weakness as Bloomberg consensus estimates expect growth to slow to 4.15% in July. There is, however, the potential for some credit acceleration due to a possible interest rate cut in September, backed by improved consumer and business confidence under a pragmatic GNU and stable load-shedding.