South Africans will this week have a clear picture of how the economy fared in the second quarter with the release of June’s manufacturing and mining production data. File Photo: IOL

JOHANNESBURG – South Africans will this week have a clear picture of how the economy fared in the second quarter with the release of June’s manufacturing and mining production data. 

Statistics South Africa will this week release output data for the two embattled sectors which contributed negatively to first quarter’s shock 3.2 percent plunge in gross domestic product (GDP). 

Manufacturing declined 8.8 percent, mining and quarrying industry dropped by 10.8 percent. 

FNB chief economist Mamello Matikinca-Ngwenya said the mining sector has remained in the doldrums, contracting on an annual basis since November last year. 

“The June print is expected to have fallen, yet again, as the sector continues to struggle with high input costs, particularly in the gold sector, waning global demand and subdued commodity prices,” Matikinca-Ngwenya said. 

“Manufacturing production volumes have displayed a year-to-date increase of 1.5 percent year-on-year as at the end of May. Similarly, we anticipate a 1.6 percent year-on-year uptick in the June print as food production, primarily dairy and beverage output, likely supported overall manufacturing  activity.”

Mining output shrank 1.5 percent from a year earlier in May, which marked the seventh consecutive month of decline, with the largest negative contributors being gold and diamond production. Manufacturing production on the other hand had growth slow to 1 percent year-on-year in May 2019 from 4.3 percent in the previous month. June’s production data marks and end of the sectors second quarter activity data. 

Investec economist Kamilla Kaplan said that mining and manufacturing sectors are expected to have made a positive contribution to GDP in the second quarter. 

“For the month of June, manufacturing is forecast to have increased by 2.4 percent year-on-year versus a prior 1 percent year-on-year while mining production is forecast to have contracted by 2 percent year-on-year following a 1.5 percent year-on-year decline in May,” Kaplan said. 

“However, both of the sectors are on track to have made positive contributions to second quarter GDP based on their three-month seasonally adjusted readings. The performance of both the sectors is constrained by weak domestic demand and declining growth in world volume trade.”

South African gold production has declined by more than 54 percent since 2005, for reasons including increased depth of mining, less working time at the face due to greater distances from shaft infrastructure, declining grades, rising costs and stoppages.

Gold mining production extended its longest losing streak in more than a decade, pulling down output in the entire industry in May.

Output in the gold mining industry plunged 24.4 percent, the 20th month of consecutive contraction percent year-on-year in May from a 19.1 percent plunge in April.

South Africa Chamber of Commerce and Industry (Sacci) will also this week release July’s business confidence data. Sacci’s business confidence index fell to 93.7 points in June, compared to 94 points in May. On an annualised basis, the BCI was 1.2 index points lower than the 94.9 points recorded in June last year.

BUSINESS REPORT