Mining production on an annual basis in October rose by 3.9%, significantly surpassing the Bloomberg consensus of a 1.2% climb, according to data released by Statistics South Africa (Stats SA) on Tuesday. This was its steepest annual rise in almost two years.  

In the three months to the end of October, mining output had a lift of 0.7%. If it can contain that momentum, mining will make a positive contribution to the quarter-on-quarter Q4 gross domestic product (GDP) read, which will show whether or not the economy slid into a recession after contracting by 0.2% in Q3.  

The mining rebound in October followed an annual decline of 1.9% in September and was led by the platinum group metals (PGMs) sector, which saw a robust 16.9% boost in production.  

That may not last, as PGM prices have fallen sharply in the face of a still fragile global economic recovery, raising expectations that producers will cut output and embark on painful restructuring that may put thousands of jobs on the line in an economy with an unemployment rate of more than 30%. 

Diamond production maintained its downward trajectory, falling by almost 22% on a year-on-year basis, its 13th consecutive month of decline. Diamond demand has plunged, notably in markets such as China, as the global economic recovery struggles to gain traction.   

“The lingering impact of load shedding, as well as rail and ports infrastructure inefficiencies, is expected to continue to disproportionately weigh on the sector’s activity. Slowing global growth, including in China, bodes ill for South Africa’s major mineral exports,” Thanda Sithole, FNB senior economist, said in a note on the data. 

Meanwhile, the manufacturing data for October were a mixed bag.  

Manufacturing production spiked 2.1% higher year on year in October, also exceeding Bloomberg expectations of a more moderate 1.7% expansion. But base effects were at play as the crippling Transnet strike occurred in October last year.  

On a monthly basis, output dipped by 0.2% and in the three months to the end of October it fell by 0.7%. If that trend is maintained, manufacturing will make a negative contribution to the Q4 GDP number.  

“Subdued global conditions and the myriad of domestic challenges continue to impede manufacturing sector activity and export potential… Despite October’s result, the sector remains lacklustre,” said Investec economist Lara Hodes.  

The bottom line is that there is a better start than expected to the final quarter of 2023 for the industrial engine rooms of the economy. That raises a glimmer of hope that a recession may be averted.  

But consumer and agribusiness confidence indices have collapsed this quarter, and the snarl-up at the ports and persistent power shortages are clearly taking a mounting toll on the economy. If a recession is avoided, any growth in Q4 is bound to be stunted. DM