Mining and retail stats to give clues on how economy fared
This week will be thin in terms of economic data. Mining output for December is due on Tuesday and then the focus shifts to consumer strength, with Stats SA issuing December retail sales on Wednesday.
Both data points are key reads for fourth-quarter GDP growth and provide insight into how the productive and consumption sides of the economy fared in 2023, firming up the GDP forecast.
While mining production surged in November, exceeding market forecasts and clawing back some of the losses of 2023, Nedbank senior economist Isaac Matshego said they expect continued weakness in mining production as power shortages and Transnet logistical inefficiency constrain the sector.
Bureau for Economic Research (BER) economists said it will be interesting to see the effects of intensified port disruption, with higher stocks necessitating lower production. Mining production rose 6.8% on an annual basis in November after a downwardly revised 3.6% rise in October. The outcome marks the second successive month of growth in mining activity and the strongest since July 2021. It also surpassed market forecasts of a 3% advance.
FNB senior economist Thanda Sithole said sustained monthly momentum indicates a positive contribution to fourthquarter GDP growth. “It aligns with our view that GDP likely rebounded in the fourth quarter following a 0.2% quarter-onquarter third-quarter decline.
“While the peak of loadshedding intensity has passed, the mining sector will continue to grapple with enduring challenges posed by port and rail infrastructure weaknesses,” said Sithole.
“The dynamics of external demand will play a pivotal role, and we maintain a cautious outlook given escalated geopolitical tensions. Potential disruptions in shipping could further impact domestic exports of break-bulk commodities.”
The mining industry has shrunk 0.4% a year since 1994. It contributed 10% to GDP in 1993. The council, which has 73 members representing 90% of SA’s mineral production valued at R1.1-trillion in 2023, forecasts real mining output will be down about 0.5% in 2023 as a result of the sector’s problems.
Minerals Council CEO Mzila Mthenjane said these include unprecedented electricity load curtailment, a particular constraint on deep-level mining in precious metals. He cited rail and port failures that hit the bulk commodities subsector and pervasive crime and devastating loss of life late in the year.
“In addition, the commodity price cycle turned against PGMs [platinum group metals] and coal miners,” said Mthenjane said. “Transnet rail woes curtailed export volumes. Transnet logistical issues also adversely impacted the iron ore and chrome sectors.”
Minerals Council SA research projects the industry to have contributed 6.2% to GDP in 2023, down from 7.3% in 2022. The sector’s direct GDP contribution is forecast to be R425.6bn in 2023 from R483.3bn previously. In terms of employment, the council states the industry’s employment numbers are at 477,000, up from 469,353.
Stats SA releases December retail sales data on Wednesday. Sales volumes underwhelmed in November, despite Black Friday incentives. Stats SA data showed volumes shrank 0.9% in November. October’s data was revised to a 2.3% fall from a 2.5% contraction initially.
FNB chief economist Mamello Matikinca-Ngwenya said the November outcome underscored the subdued consumer backdrop, with costof-living pressures weighing on discretionary incomes. That is consistent with sentiment indicators, “especially in consumer-facing sectors, which predicted weakening consumer demand into the 2023 festive season”.
Household consumption has been on a downward trajectory, falling in the second and third quarters of 2023 as a result of the cumulative rise in interest rates. The Reserve Bank increased rates by 475 basis points from November 2021 to May 2023, taking its benchmark repo rate to 8.25%.
BER economists said the domestic trade data is likely to remain subdued with SA consumers under pressure.
“This was reflected in the weakest festive season FNB/BER consumer confidence index print in two decades as well as poor sales volumes as per the quarter four BEF Retail Survey,” they said in a note.
Nedbank forecasts retail sales to have contracted 1.3% year on year in December,
Matshego said. “The continued weakness reflects extremely tight conditions as consumers face high interest rates, still elevated food inflation, and deteriorating sentiment.”