Johannesburg - The weak manufacturing and mining output data released by Statistics SA yesterday signal another depressed outlook for growth in the economy this year.
Analysts now forecast 2 percent gross domestic product (GDP) growth, in line with last year’s stunted 1.9 percent, as yesterday’s data mirrored the damage wrought by the protracted wage strike in the platinum belt and the continuing subdued outlook for the manufacturing sector.
The electricity supply constraints also contributed to the decline in production in the mining sector.
The rand, however, was unfazed by the release of the data.
“The production data highlights a bleak outlook for GDP growth in the first quarter and illustrates the downside risks to growth in the South African economy this year,” David Faulkner, a South Africa economist at HSBC, wrote in a note yesterday.
GDP refers to the monetary value of all the finished goods and services produced within a country within a specified time period.
Manufacturing and mining are significant drivers of economic growth and contribute 15 percent and 5 percent to South Africa’s GDP, respectively.
“HSBC expects GDP to expand by just 0.2 percent quarter on quarter in the first quarter and growth of 1.8 percent for 2014,” Faulkner said.
Stats SA showed a disappointing 1.4 percent year-on-year growth in manufacturing output in February from 2.2 percent in January. This was far below market expectation of 4 percent growth.
Only the petroleum sub-sector registered higher growth, at 4.4 percent year on year compared with 1.6 percent previously. Food and beverages output grew an annual 3.4 percent and the steel, iron ore and non-ferrous products sector grew 1.3 percent.
Growth decelerated or output contracted in the remaining main sub-sectors.
Kamilla Kaplan, an Investec economist, said manufacturing growth was “increasingly contingent on a sustained recovery in the global economy, given that growth in domestic consumption demand is slowing”.
In mining, output dropped by 4.8 percent year on year after registering 3.7 percent growth in January.
Seasonally adjusted mining production declined by 7 percent in February, and rose marginally by 0.7 percent quarter on quarter for the three months to February.
Output of platinum group metals (PGMs) fell 35.8 percent, subtracting 7.6 percentage points from headline annual mining production growth.
Stats SA said other minerals that contributed to the 4.8 percent decline were building materials, which dropped by 10.3 percent, and diamonds, falling by 8.4 percent.
At the same time coal contributed a negative 1.3 percentage points to growth.
The mining data are expected to worsen further from April to reflect diminishing inventories as platinum producers seek to buy the metal in the market to supply customers.
Johannes Khosa, an economist with the Nedbank Group economic unit, forecast that labour unrest, infrastructure constraints, a challenging policy environment and slower economic growth in China were expected to contribute to volatile mining figures.
Asked when the strike would hit investor sentiment, he said: “We have to wait until the outcome of the general elections, that is when the direction of the policy will be clear.”
Since the strike, which started on January 23, about 500 000 ounces have been lost at Lonmin, Anglo American Platinum and Impala Platinum.
About 70 000 Association of Mineworkers and Construction Union members have been on strike for a R12 500 minimum entry level wage.
The impact of the strike has been described as unprecedented and has hurt the industry more than the 12-week strike that claimed more than 40 lives at Lonmin’s Marikana mine in August 2012.
The strike in its 12th week has cost the mining industry R12.375 billion in revenue and employees had lost R5.5bn in wages, as of yesterday.