Huge growth in mining production in August surprises market analysts
Mining surprised on the upside in August with exceptionally strong growth, indicating that GDP growth might be stronger in the third quarter.
Mining production increased a significant 6.9% year-on-year in August after lifting 0.9% year-on-year in July.
The biggest positive contributors were iron ore, which added 1.3 percentage points; diamonds 1.2 percentage points and gold 1.1 percentage points.
The global oversupply of iron-ore has pushed the price of the commodity lower, and output of the ore, which accounts for nearly 15% of mining production, should have softened.Mamello Matikinca, FNB
Seasonally adjusted mining production increased 5.3% in August compared with July, and increased 1.4% in the three months ended August 2017 compared with the previous three months.
Many economists were expecting a contraction in the sector.
FNB economist Mamello Matikinca expected a year-on-year contraction for the first time in 2017, primarily due to the higher base of August last year.
"The global oversupply of iron-ore has pushed the price of the commodity lower, and output of the ore, which accounts for nearly 15% of mining production, should have softened," she said.
Investec economist Kamilla Kaplan said last week: "Higher base factors are expected to have suppressed this year’s outcome. However, in the year to date, to July, mining production has risen 4.5% year on year, aided by the lift in commodity prices and increased global growth momentum."
Kaplan expected mining to contract by 2.0% year on year while macroeconomics website Trading Economics projected mining output to have risen 0.3% from July 2016.