Picture: ISTOCK
Picture: ISTOCK

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.

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