Mixed fortunes for two of South Africa’s most important sectors
The latest mining and manufacturing data in South Africa have shown mixed results, with the former coming in better than expected and the latter worse than anticipated.
The latest Stats SA data showed that mining production increased from a contraction of 1.0% in July to growth of 0.3% in August – far better than the Reuters consensus of a 2.1% contraction.
Mining output grew by 2.9% m/m on a seasonally adjusted basis, offsetting the 0.8% decline in July.
That said, output for the three months ending in August still fell by 1.4%, suggesting that the mining sector could weigh on GDP in Q3 2024.
Overall, five of the 12 mining divisions saw increases, with the best performers being:
- Platinum Group Metals (PGMs) increased by 4.7% y/y in August after declining by 0.8% in July, contributing 1.2 percentage points (ppts) to total output growth.
- Manganese ore output increased by 16.0% y/y, adding 1.2ppts to total growth, though this was a slowdown from the 27.0% y/y surge in July.
On the downside, the worst offenders were:
- Iron Ore output fell 15.2% y/y, slightly improving from the 19.0% y/y drop in July, but still detracted 2.1ppts from total growth.
- Gold output contracted by 4.6%, marking its tenth consecutive month of decline, shaving off 0.7ppts from total mining growth.
- Coal output decreased by 0.7% following a 1.3% increase in July, reducing total growth by 0.2ppts.
Mining output is up 0.3% over the year, outperforming the declines of 0.2% in 2023 and 7.2% in 2022.
Thanda Sithole, FNB Senior Economist, said that although energy constraints have eased, mining activity is expected to remain moderate in the near term due to a stable yet challenging external demand environment.
“Ongoing inefficiencies in port and rail infrastructure continue to limit productivity and profitability across the sector,” added Sithole.
Manufacturing data
Manufacturing data contracted by 1.2% in August, following an expansion of 1.6% in July.
The figure was worse than the Reuters prediction of a 0.5% decline.
The following divisions made the largest negative contributions:
- motor vehicles, parts and accessories and other transport equipment (-16.1% and contributing -1.6 percentage points); and
- basic iron and steel, non-ferrous metal products, metal products and machinery (-5.4% and contributing -1.2 percentage points).
Seasonally adjusted manufacturing output fell by 0.6% m/m, slightly offsetting the downwardly revised 1.6% monthly expansion in July (previously 2.1%).
“The decline in monthly output was reflected in the manufacturing PMI business activity index, which fell deep into contraction, reaching 38.9 points in August. However, this index rebounded to 50.7 points in September, indicating a potential recovery in monthly output,” said Sithole.
Output was flat at 0.1% for the three months ending in August. That said, September’s production is likely to see positive growth.
“Total manufacturing output is down 0.5% year-to-date (January to August), reflecting challenging demand conditions due to weak consumer fundamentals and broad-based declines in domestic private sector fixed investment,” said Sithole.
“Although stable, external demand remains challenging, weighing on manufactured goods exports. We anticipate a modest yet uneven recovery in the near term as demand conditions improve amid easing cost-of-living pressures.”
“The manufacturing PMI expected business conditions index rose to 70.8 points in September from 61.3 in August, suggesting that manufacturers foresee improving operating conditions.”
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