Surprise growth in mining production in September
Mining production grows 0.2% year-on-year, above the expectations of economists
SA’s mining sector registered surprise growth in September, with iron ore leading the gains.
But the lift is unlikely to be enough to ensure the sector contributes to economic growth in the third quarter of the year, according to economists. The data follows disappointing manufacturing and retail figures, which highlight the low levels of demand and constrained household spending in SA's economy.
Mining production grew 0.2% year-on-year, Stats SA said on Thursday. This was well above the expectations of economists polled by Bloomberg, who expected production in the sector to shrink 2.4%. It also came after a revised contraction of 3% in August.
On a quarterly basis, however, the sector shrank 1.6% between the three months ending in September and the previous three months.
The rebound in growth was positive, said Maarten Ackerman, chief economist at Citadel Wealth Management. But when looking at the sector’s performance alongside the weak retail and manufacturing data, this pointed to “a very weak third quarter for the overall economy”.
“If you look at mining for this quarter so far, it’s probably going to take 0.5% away from [overall] economic growth,” Ackerman said.
In the coming months, local factors such as uncertainty over electricity supply and Eskom's capacity were likely to keep the sector under pressure, he said. Productivity in the sector and the cost base of mines in SA were also a concern.
Deepening labour dissatisfaction, particularly in the public sector where unions are opposing wage cuts and retrenchments in both government and parastatals, did not bode well for industrial relations in the mining industry, Ackerman said.
Nedbank economists Isaac Matshego and Dennis Dykes said in a note that the mining figures remain in line with other indicators of real economic activity, and continue to reflect a generally subdued environment.
Given this weak economic outlook, as well as a subdued inflation outlook and shifts to looser monetary policy globally, there was still a small chance the SA Reserve Bank could cut interest rates at its next monetary policy committee meeting, they said. /with Karl Gernetzky