SA mining output falls in July and manufacturing growth slows, signalling fragile start for Q3 GDP
As rolling power cuts intensified in September, data this week showed that the economy’s industrial arms got off to a faltering start in the third quarter (Q3) of this year. Mining production fell, while manufacturing output expanded at a slower rate in July. With the return of Stage 6 power cuts in the quarter’s final month, it all bodes ill for the Q3 GDP number.
South Africa dodged a winter of discontent, but the economy remained in the doldrums.
Data released this week by Statistics South Africa (Stats SA) painted a bleak picture of industrial production in July, suggesting a loss of what little momentum there was after the economy grew by a faster-than-expected 0.6% in Q2.
Read more in Daily Maverick: South Africa’s GDP exceeds expectations with 0.6% growth in Q2
Manufacturing production, a key driver of Q2 GDP growth, expanded at a much slower rate in July on an annual basis than it did in any of the previous three months, while mining output tanked, maintaining its long-term decline.
Stats SA data on Monday showed that manufacturing output rose by 2.3% year on year in July after climbing by 5.9% in June. In May it posted annual growth of 2.5%, and 3.6% in April. On a monthly basis, it declined by 1.6%, its biggest monthly dip so far this year.
The mining data published on Thursday were more dire. Mining production fell by 3.6% year on year in July, far undershooting the Bloomberg consensus forecast of a 0.2% contraction.
Platinum group metals (PGM) production led the way with a 10.4% decline, underscoring the woes of a sector that has seen the record prices and earnings of two years ago fall back to Earth in the face of concerns about global economic growth and China’s stuttering recovery.
On a monthly basis, mining output dropped by 1.7% in July.
“This [mining] data, together with manufacturing output and electricity production, paint a gloomy picture at the start of the third quarter and are consistent with the general expectation of a GDP growth moderation following a better-than-expected 0.6% quarterly expansion in the second quarter,” Thanda Sithole, a senior economist at FNB, said in a note on the data.
The volume of electricity generated in South Africa fell by 3.4% in July, Stats SA said last week.
The bottom line is that the economy’s industrial arms got off to a faltering start for Q3.
And now in September, the final month of the quarter, rotational blackouts have once again reached Stage 6. Combined with all of the other constraints to domestic GDP growth — high interest rates, slowing global growth, Transnet’s woes, ill-conceived government policies that scare the hell out of investors and a host of other challenges — the economic outlook is dimming even as the days grow longer with spring.
At least inflation is subsiding under the vigilance of a hawkish central bank, but that is also a consequence of an economy that is running on empty.
It’s still too early to call the Q3 GDP number — the quarter is not over yet, and there are still data for July, not to mention August, that have not yet been crunched — but the prospects of a contraction are certainly growing. DM