Cape Town - Last week’s upbeat mining data suggested that South Africa’s economic growth would gain traction later in the year, and that the economy would weather the recent political storm.
On Thursday Statistics South Africa revealed that mining output for February jumped 4.6 percent year-on-year, much higher than the consensus rise of only 1.4 percent .
The production of platinum group metals compensated for a steep fall in gold output after it rose by 47 percent year-on- year.
Africa economist at Capital Economics, John Ashbourne, said the effect of the recent downgrade of South Africa’s sovereign credit to junk would not be clear until at least June when the April activity data is released, but expected the country to withstand the headwinds.
“Despite the worrying headlines, however, we expect that South Africa’s improved external position will help the economy to weather the latest political shock. Indeed, we’ve held our view that growth will pick up faster than most expect. This relies heavily on a significant recovery in the agricultural sector later in 2017,” Ashbourne said.
South Africa’s agricultural sector was under severe strain last season as a result of the drought that ravished sub-Saharan Africa in the past two years.
However, the sector seems to be picking up with farmers estimating a bumper crop this year.
Agricultural economist at the Agricultural Business Chamber, Wandile Sihlobo, last week said available data suggested South Africa was set for a good agricultural season.
“Earlier this week the USDA’s monthly report laid a bearish foundation in the global market, forecasting the 2016/17 global maize production at 1.054 billion tons, which is a 9 percent annual increase.
"The major contributors are set to be the US, Argentina, Brazil, South Africa and the EU region,” Sihlobo said.
The uptick in the mining figures came against gloomier data from other sectors, which showed retail sales fell 1.7 percent year-on-year in February, the worst performance in more than five years.
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Stats South Africa said the manufacturing sector also had a very weak month in February, plunging 3.6 percent year-on-year, the sector’s worst performance since 2014.
The SA Chamber of Commerce and Industry also said the seasonal adjusted six-month trade expectations index weakened notably during the period to end March - the weakest level in one year.
Stats SA said the only industry to avoid contraction was the automotive, whose output increased by 0.8 percent.
Ashbourne said at the quarterly rate that aligns with official GDP figures, the mining and manufacturing sectors both performed better in the three months to February than they did in late 2016, while the retail sector stumbled.
Timely
“Our GDP tracker, which uses activity figures to create a more timely measure of economic growth, suggests the GDP fell by 1.6 percent year-on-year in February.
"After contracting in the fourth quarter, there is a good chance the economy entered another technical recession in the first quarter.”
The rand, which has fallen in spectacular fashion since the dismissal of Pravin Gordhan and the downgrading of the country to junk by Standard and Poor’s and Fitch showed signs of life on Thursday, strengthening 2.09 percent against the dollar from midday on Wednesday in line with the dollar depreciation against major currencies and was also higher commodity prices.
By 5pm, the rand was bid at R13.4251 against the greenback.