Industrial data not expected to lift gloom

Economists expect the spate of weak industrial data from SA’s manufacturing and mining sectors to continue this week and are bracing for another quarter of subdued GDP growth for the economy as a whole.

Manufacturing and mining production figures for May will be released by Statistics SA on Thursday but there is little sign that the production side of the economy has sloughed off the dismal performance it exhibited in the first quarter.

In fact, the Absa manufacturing purchasing managers’ index has continued to slide, from 50.9 in April to 49.8 in May. In June Eskom cut electricity supply as a result of industrial action.

Capital Economics’s GDP tracker confirms fears that SA’s overall economic contraction probably deepened in the second quarter.

“Domestic demand remains relatively subdued and growing fears of a trade war, coupled with concerns about a slowing global economy, are likely to have hampered output,” warns FNB senior analyst Jason Muscat.

BNP Paribas economist Jeff Schultz expects year-on-year growth in manufacturing activity to have slowed to just 0.1% in May from 1.1% in April, though the month-on-month growth figure may have tracked marginally higher. On a threemonth rolling basis, manufacturing output is likely to be negative again in May, he warns. This suggests the sector will make another relatively lacklustre, or even mildly negative, contribution to SA’s overall economic performance in the second quarter.

In the first quarter, mining growth slipped almost 10% quarter on quarter on softer commodity prices and a stronger rand. The same pressures hit manufacturing, which slowed by 6.4%.

Mining production figures are notoriously choppy but it still seems unlikely, given the continued softness in industrial commodity and precious metal prices, that annual growth will climb back into positive growth territory in May. Mining production fell by 4.3% year on year in April.

The South African Chamber of Commerce and Industry will release its business confidence index for June on Tuesday. The index has declined each month from a high of 99.7 index points in January 2018.

SA’S OVERALL ECONOMIC CONTRACTION PROBABLY DEEPENED IN THE SECOND QUARTER