SA mining output surges, underpinned by gold

MINING production data released yesterday by Statistics SA showed that mining output in South Africa had surged 6.9 percent year-on-year in August following an upwardly revised 1.9 percent rise in July, surpassing market consensus of a modest 0.1 percent gain.

The increase in production was supported by a surge in global commodity prices in the period and was underpinned by strong performance in gold output which surged 7.7 percent in August compared to 5.8 percent recorded in July.

Diamond production inched up 27.7 percent in August compared to 16.6 percent in the previous month, while iron ore, which rebounded 9 percent compared to a decline of 5 percent in the previous month.

On a monthly basis, mining output went up 5.3 percent. John Ashbourne, an Africa economist at Capital Economics, says August mining production figures suggest that the sector remained strong in the middle of the third quarter.

“This marked the sector’s strongest growth since March. The gold, iron and diamond sectors made the largest contributions to growth.

“But output rose across almost the entire mining industry, with copper the only sub-sector in which output fell year-on-year,” Ashbourne says.

The mining production figures were the second set of positive data that took the markets by surprise, after manufacturing production data also exceeded expectations – indicating that the economy has been on a sound footing in the third quarter.

The rebound in the manufacturing sector was pretty broad-based, with seven of the 10 sub-sectors performing better in August than they did in July. At the seasonally adjusted, 3-month-on-3-month rate that aligns with official GDP figures, growth in the manufacturing sector picked up to a 22-month high of 1.3 percent.

All eyes will now be on the retail sales data expected to be released next week.