SA braces for poor production numbers
SA is braced for poor mining and manufacturing data this week, following the recent release of deteriorating unemployment and weaker manufacturing purchasing managers’ data.
SA is braced for poor mining and manufacturing data this week, following the recent release of deteriorating unemployment and weaker manufacturing purchasing managers’ data.
Stats SA will release mining and manufacturing production and sales figures for September on Thursday. This will complete the third-quarter data for these industries, giving economists a better indication of how the economy as a whole performed during the quarter.
In the first and second quarters, real GDP contracted, tipping the economy into recession. The Reuters consensus is that the economy recovered to grow at 1.5% in the third quarter and will continue accelerating to 2.1% in the final quarter, taking whole-year growth to 0.8%.
But the Absa manufacturing purchasing managers’ index (PMI) for October has raised fresh concerns about the economy after it dipped for the third consecutive month to a nine-year low of just 42.4 index points, from 44.5 previously.
The market was expecting a marginal rise in the index.
“October’s PMI reading continues to be indicative of a subdued domestic economy, characterised by mounting supply-driven inflationary pressures and muted local activity,” says Investec economist Lara Hodes.
“The domestic situation is further constrained by faltering global trade conditions, which undermines export growth.”
Together with the rise in the unemployment rate to 27.5% in the third quarter, this suggests that while the economy has probably pulled out of recession, growth is weak.
All sub-indices of the October PMI remained below the 50 mark, which divides expansion from contraction. But perhaps most worrying, says Capital Economics senior emerging market economist John Ashbourne, is that manufacturers became more pessimistic about future business conditions. The PMI does, however, often overstate the weakness in manufacturing.