The productive sectors of the economy in South Africa experienced in August mixed fortunes as mining output fell more than expected while manufacturing rose, but missed the forecasts.
Data from Statistics South Africa (StatsSA) yesterday said that mining production fell by 2.5% year-on-year in August following an upwardly revised 4.4% slump in July.
This was worse than market expectations of a 2% decline, and marked the second consecutive month of declining mining activity, largely as a result of reduced yields in diamonds, manganese ore, and other metallic minerals.
Diamond production fell for the 11th consecutive month in August, plunging by 54.6% year-on-year compared to 33.4% previously, and as a result detracting 2.7% points from the top line outcome.
Declines were also recorded in the production of manganese ore and other metallic minerals, which fell 7.9% and -17.6%, respectively.
Conversely, platinum group metals and iron ore output rose by 2.7% and 5.3% year-on-year, respectively and preventing a larger annual decline.
Gold output which has recorded robust growth over the past few months eased to 0.6% in August.
Investec economist Lara Hodes said the fragile global economic environment, with a slower-than-projected rebound in demand from China, had weighed on diamond sales, while competition from the lab-grown diamond industry persists.
Hodes said gold demand had been undermined by the higher rates for longer narrative in the US, buoying the greenback.
“Notwithstanding global factors, domestically, the mining sector continues to deal with logistical impediments, while unreliable energy supply remains a primary operational hindrance,” Hodes said.
Moreover, amongst its numerous challenges a “range of security issues has grown significantly in their impacts in recent years”, according to the Minerals Council South Africa. Indeed, these challenges continue to weigh heavily on SA’s competitive position, impeding exports and deterring investment potential.
On a seasonally adjusted monthly basis, mining production rose by 0.8% in August, reversing a 1.7% decrease in the previous month. In the year-to-date (January to August), mining output is down by 1.8% y/y, reflecting poor growth within the coal, iron ore and platinum group metals (PGMs) divisions.
Meanwhile, manufacturing production rose by 1.6% year-on-year in August following a downwardly revised 2.2% increase in July, defying market estimates of a 2.3% growth.
This marked the fifth consecutive month of growth in industrial activity, albeit the slowest in the sequence, which could result in quarterly gross domestic product growth moderating in the third quarter.
StatsSA said output slowed considerably for wood and wood products, paper, publishing and printing by 3.4% in August, down from 7% in July.
Production also declined for radio, television and communication machinery, food and beverages, glass and non-metallic mineral products, textiles, clothing, leather and footwear, and motor vehicles.
However, production rose solidly for electrical machinery and petroleum, chemicals, rubber and plastics.
On a seasonally adjusted monthly basis, manufacturing output increased by 0.5% in August, after an upwardly revised 1.7% fall in July and compared with market forecasts of a 0.8% rise.
FNB senior economist Thanda Sithole said the monthly rebound in manufacturing production, though partial, was consistent with the Purchasing Managers’ Index business activity, which recovered to 50 index points during the reference month from 38.1 in July.
Sithole said manufacturing output was still on track to show slight growth in 2023, having expanded by 0.5% in the year-to-date (January-August) after declining by 0.3% in 2022. Sithole said this was despite the challenges of load-shedding costs, weaker demand, and global trade.
“Although the latest PMI reading points to weaker activity at the end of the third quarter, manufacturers were optimistic about near-term operating business conditions,” Sithole said.
“Beyond this year, lower levels of load shedding and a modest recovery in demand should underpin growth in the sector. We are, however, still concerned about the logistics challenges, which, combined with load shedding, have been a binding constraint on economic activity.”
BUSINESS REPORT