The mining data were a mixed bag, but the headline number was a decrease in production of 1.9% in the year to January, the 12th consecutive month of annual contraction. The best that can be said was that it was better than the Bloomberg consensus forecast of a 2.8% shrinkage and that it was the shallowest annual decline over the past 12 months. 

It still points to a sector with the sun setting over it, which has largely been the case the past few years. Mining production fell 7.2% in 2022 after an 11.6% increase in 2021, which was mostly driven by a rebound from the lockdowns of 2020, when output shrank 10.4%. 

“After construction, mining is the second-worst performing sector, remaining 8.1% smaller compared with pre-pandemic levels,” Jee-A van der Linde, a senior economist at Oxford Economics Africa, said in a commentary on the data. 

But mineral sales at current prices rose 6.8% year on year, which would largely have been a function of prices and perhaps delayed sales of stockpiles and that kind of thing. 

For manufacturing, there was a year-on-year slump in production of 3.7% in January. A number of factors probably explain that decline, but the surge in rolling blackouts to relentless levels has to be the number one reason. And it was the third consecutive month of annual decline in manufacturing output, which strongly suggests a sector that is floundering.

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The monthly data for both sectors, by contrast, were more upbeat. Seasonally adjusted mining production rose 4.4% in January 2023 compared with December 2022, while for manufacturing the monthly bounce was 1.1%.

So in the face of numerous headwinds, notably the power crisis, the two sectors began 2023 and the current quarter in expansionary territory on a monthly basis. That will feed positively into the first quarter (Q1) gross domestic product (GDP) number amid mounting signs on other fronts that the economy may have fallen into a recession after contracting 1.3% in Q4 2022. 

“Although it is too early to tell, the positive outcome in monthly output (both during months of intense load shedding) somewhat lessens fears of a likely quarterly decline in Q1 GDP. However, conditions remain precarious, and we will closely monitor the rest of the incoming monthly indicators this week to get a partial picture of how the economy is faring in the current quarter,” said Thanda Sithole, FNB Senior Economist.

The next indication on this score will be the retail trade sales data for January, which Stats SA will publish on Wednesday. Rising interest rates, inflation, stagnating household incomes and the disruptions of power cuts hardly hold promise for an inspiring number. 

With no signs of the energy crisis abating – the new electricity minister has no magic wand to wave around – and the ongoing derailment of Transnet, it is hard to see how the mining and manufacturing numbers can significantly improve this quarter. Recession watch remains the order of the day. DM/BM