Manufacturing, mining production in decline

MANUFACTURING and mining output fell worse than expected in October, pointing to weak economic growth in the fourth quarter after the economy barely grew in the third quarter.

Data from Statistics South Africa (Stats SA) yesterday revealed that manufacturing output contracted by an annualised 2.7 percent in October after expanding by 0.2 percent in September, and lagging market expectations of a 0.65 percent increase.

Month on month, factory production fell 1.9 percent and edged down 1.8 percent in the three months to October compared with the previous three months, it said.

Separately, mining output fell by an annualised 2.9 percent in October after expanding by 4.7 percent the previous month.

The rand fell more than 1 percent against the dollar to a session low of R13.64 after the mining data was released, and extended its losses when the manufacturing data was announced.

Capital Economics Africa economist John Ashbourne said in a note that both the manufacturing and mining data suggested the economy might have performed even worse in the fourth quarter than it did in the third.

“This supports our view that economic momentum will be very weak going into 2017 and that the SA Reserve Bank will probably keep its key policy rate on hold,” he said.

“October’s mining and manufacturing data were both worse than even the most pessimistic analysts had expected.”

Gross domestic product (GDP) expanded by only 0.2 percent in the period between July to September as the manufacturing sector contracted sharply.

The GDP data renewed fears that the reprieve from credit ratings downgrades will only be temporary.