Glum stats throw monkey wrench into works

Surprise slide in manufacturing, mining output in first quarter Don’t worry, be happy

NEWS of January’s unexpected plunge in manufacturing production and a sharper-thanexpected fall in mining output confirmed that the spurt in economic growth since the end of last year will be brief.

The slump in these two sectors, which together account for about a fifth of GDP, also reflects the harm that power cuts inflict on South Africa’s sluggish economy, adding to concern that it will fail to gather much momentum over the next two years.

Barclays economist Peter Worthington said that economic growth was likely to slow to 1.8% in the first quarter of this year, seasonally adjusted and compared with the previous quarter, after jumping by 4.1% in the previous quarter.

“We have cautioned that the strong Q4 GDP performance was very unlikely to be sustained. Today’s weak manufacturing and mining data lend some support to this view,” he said on Thursday after Statistics SA released the figures.

Manufacturing fell 1.5% in January compared with the previous month and 2.3% compared with that of the previous Jan- uary, after notching up growth of 0.8% and 0.9% respectively in December. Markets had expected modest increases.

The manufacturing figures “will do little to allay concerns over the growth outlook. It remains uncertain in 2015, given power shortages, slow growth in key export markets, sharply lower commodity prices and generally subdued domestic demand,” Nedbank said in a research note.

Mining output fell 5.4% during the month and 4.7% compared with the previous January, the figures showed.

Coenraad Bezuidenhout, executive director of the Manufacturing Circle, said that manufacturing output was hit mainly by electricity blackouts during the month, which have prompted many companies to limit or reschedule production.

“There have been problems at the municipal level — some municipalities have found that they are not able to honour commitments on electricity supply, undermining investment in planned projects,” he said.

Both Eskom and the govern- ment have warned that intermittent power outages are likely to continue for three years as the cash-strapped utility battles to maintain aged infrastructure and complete two new power stations, which are running well behind schedule.

This does not bode well for manufacturing as many companies, such as miners, are energy intensive.

The sector’s overall contribution to the economy shrank from 18.6% in 2004 to less than 13% late last year.

Business confidence dipped in the first quarter, mainly because of the mood in the manufacturing sector, according to a key index released on Tuesday by the Bureau for Economic Research and Rand Merchant Bank. It showed that manufac- turing confidence plunged to 30 points from 42 points in the final quarter of last year.

The survey backed the message from SA’s purchasing manager’s index earlier this month, which fell by a steeper-thanexpected 6.6 index points to 47.6 in February. A reading above 50 indicates expanding activity, while a reading below 50 points to a contraction.

Another survey from the Manufacturing Circle showed that 81% of companies included expect fragile or weak to stable conditions over the next two years, compared with just 39% a year earlier.

Stanlib economist Kevin Lings pointed out that manufacturing production declined by 0.1% over the whole of last year — despite the rand losing 30% against the dollar over the past three years.

“Clearly, rand weakness does not automatically translate into increased manufacturing production, especially when the sector is plagued by regular bouts of labour unrest and periodic electricity outages,” Lings said.

The rand plunged to successive 13-year lows against the dollar this week, hitting a trough of 12.38/$ on Wednesday.

Analysts said concern over the depreciation was overdone as it mainly reflected gains in the greenback fuelled by speculation US interest rates will rise soon. Other emerging market currencies, particularly the Turkish lira and Brazilian real, also took a hard knock.

The rand has actually appreciated against the euro — also falling against the dollar — which means that its nominal effective exchange rate measured against a basket of currencies is stronger than when the Reserve Bank began to raise interest rates in January 2014.

Nonetheless, the trend reinforces the view that the Reserve Bank will start raising interest rates later this year to fight inflation, which will start to climb again as global oil prices start to recover and hefty fuel levies are imposed on domestic petrol prices. Comment on this: write to letters@businesstimes.co.za or SMS us at 33971 www.timeslive.co.za LOAD-SHEDDING, dismal growth figures and the embattled rand have taken the shine off South Africa’s sunny skies, but rather than feeling glum, we need to find and focus on the positive.

”There are significant challenges in South Africa. Positive psychology doesn’t focus on being positive regardless of all else. It focuses on balancing the negative and positive emotions we feel,” says Tal Ben-Shahar, an expert on the science of happiness at work.

Ben-Shahar, who created the most popular course in the history of Harvard University, will be in South Africa this week.

The positive psychology he refers to uses scientific investigation to discover how people, communities, organisations and nations can thrive and flourish.

Happiness may seem too touchy-feely , but recent research from executive search firm Korn Ferry has found that happy workers are more productive and cope better when facing fresh challenges.

”We tend to focus on our negative emotions, which is a survival technique that is hardwired into our brain,” says Ben-Shahar.

Despite this, in the course of the average day, we experience more positive emotions, but they tend to be subtle and fleeting, so we notice them less. “When we do start noticing them, and constructing experiences to realise their possibility in our lives or in our workplaces, we tend to build our resources around innovation, creativity, energy, resilience, coping, connecting and problemsolving.”

The companies that make an effort to help workers experience more positive emotions reap the rewards of workers who can take on more challenges, he says.