Mining production fell by 1.9% year on year in September, while manufacturing output dropped by a worse than expected 4.3%. It all adds up to a potential contraction in South Africa’s gross domestic product (GDP) in the third quarter (Q3).  

Diamonds led the fall in mining production with a plunge in output of 61.4% year-on-year in September. This comes against the backdrop of a global slump in prices and demand. De Beers said on Wednesday that it had sold $80-million of rough diamonds during its latest sales cycle in October compared to $454-million in the same period last year.  

Overall, Stats SA said mining production fell by 1.9% year on year in September, and by 1.6% in the three months to the end of September. This means it will be a drag on the quarter-on-quarter GDP number for Q3, which will be released in December.  

The manufacturing data were grimmer and will also detract from Q3 GDP, signalling a possible contraction as power outages, Transnet’s woes, high interest rates and other factors such as crime continue to rob the economy of growth potential.  

Manufacturing output slumped by 4.3% year on year in September — a bigger contraction than the fall of 2.5% forecast by Bloomberg — and fell 1.2% in the three months to the end of September.  

And things do not look upbeat this quarter. The Absa Purchasing Managers’ Index (PMI), released last week, fell in October to 45.4 from 46.2 in September. Remaining mired below the neutral 50 mark suggests the manufacturing sector continued its decline in the first month of Q4.  

“Along with most other sectors of the economy, conditions in the manufacturing sector remain lacklustre … advance indications provided by October’s PMI reading show that the gauge moved further into contractionary territory, evincing a weakening in SA’s manufacturing sector at the start of Q4,” Investec economist Lara Hodes said in a note on the data.  

South Africa’s unemployment rate in Q2 was 32.6% and the Q3 number will be released next week. Spoiler alert: it’s bound to still be dire. DM