New data on manufacturing and mining production suggest clouds may be gathering over the Ramaphoria economic spring. While it is dangerous to read too much into any small batch of figures, there appears to at least be a hiccup in two key sectors of the economy, which might curtail the rate of growth.
Statistics released on Thursday showed annual mining production declined by 8,4% in March from a 2% increase in February, dragged down mainly by gold and platinum group metals, which shaved off 2,5 and 1,5 percentage points respectively.
On a seasonally-adjusted basis mining production decreased by 3,4% m-o-m in March and 2,5% q-o-q over the first quarter.
Investec’s economics team commented: “Notwithstanding the drop in production, which was exacerbated by high base effects, 2018’s robust global growth and strong commodity prices, should lend support to the mining sector.
“Additionally, President Cyril Ramaphosa advised in a recent statement that “The mining charter will be finalised very soon and we have set a deadline.” This should remove some of the regulatory uncertainty that has plagued the industry and impeded much needed investment into the sector.
On manufacturing, Nedbank announced that “manufacturing production came out much weaker than expected in March.
“Total output rose by a seasonally adjusted 1,3% m-o-m, but declined by a similar margin of 1,3% y-o-y after growing by a weaker-than-expected 0,5% in February. The consensus market forecast was for growth of 1% y-o-y.
”On an annual basis the main drag came from sharp declines in output in some of the major export-orientated sectors, particularly ‘petroleum, chemicals, rubber and plastics’, ‘wood, paper, publishing and printing’ and ‘iron and steel, non-ferrous metals, metal products and machinery’.
“Over the quarter manufacturing production declined by a seasonally adjusted 1,7% q-o-q.
“Manufacturing is expected to fare better during the remainder of the year. The main momentum is still forecast to come from stronger global growth and firmer international commodity prices. The sector is also particularly vulnerable to any setbacks in global growth, where downside risks remain as confidence has been hurt by concerns of the likely negative consequences of the trade war raging between the US and China and the US’s decision not to renew the Iran nuclear deal but rather re-impose sanctions on Iran.”
Investec agreed that there is no need to panic.
It wrote: “This outcome is in line with advance indications provided by March’s PMI release, which suggests that business activity waned in March. Looking forward however recent positive developments, including a sharp rise in consumer confidence, coupled with a low inflationary environment and an interest rate cut should boost private consumption and (e)xpectations for output in Q2.18 are very upbeat,” according to the Bureau for Economic Research (BER).