Published On: Mon, May 21st, 2018

South Africa GDP to suffer impact of fragile sectors


JOHANNESBURG – ECONOMISTS have forecast the struggling manufacturing and mining sectors to impede the growth of South Africa’s gross domestic product (GDP) in the first quarter of 2018.

The projections come in the wake of figures released by Statistics South Africa indicating manufacturing production in the continent’s most advanced economy was lower than anticipated while annual mining production also declined by 8,4 percent in the same period.

Busisiwe Radebe and Dennis Dykes, the Nedbank economists, described manufacturing production as “much weaker than expected.”

Total output rose by a seasonally adjusted 1,3 percent month-on-month (m-o-m) but declined by a similar margin year-on-year (y-o-y) after growing by a weaker-than-expected 0,5 percent in February.

The consensus market forecast was for growth of 1 percent y-o-y.

The sharpest declines were recorded in some of the major export-orientated industries, particularly petroleum, chemicals, rubber and plastics, ‘wood, paper, publishing and printing as well as iron and steel, non-ferrous metals, metal products and machinery.

Mining suffered its biggest fall since March 2016, dragged down mainly by gold and platinum group metals, which shaved off 2,5 and 1,5 percentage points respectively.

Diamonds and iron ore also contributed to the decline.

On a seasonally adjusted basis, mining production decreased by 3,4 percent m-o-m in March and 2,5 percent quarter-on-quarter (q-o-q) over the first quarter.

Mpho Tsebe, the Rand Merchant Bank (RMB) economist, reiterated market sentiments that mining and manufacturing production data came out weaker than expected.

“This, coupled with the revision of prior months’ data lower, shows that both these sectors will subtract from overall GDP l growth in 1Q18,” Tsebe said.

Miyelani Maluleke and Peter Worthington, the Absa Capital analysts, described mining production in the aforementioned period as “a big disappointment and output a lot weaker than consensus while the manufacturing sector was particularly knocked in the first quarter by a temporary petroleum refinery closure.

This appears to be in reference to the impact of the temporary closure of Britain’s most important oil and gas pipeline during the period.

Statistics South Africa is scheduled to release Q1 18 GDP data on June 5.

The Absa analysts forecast just 0,2 percent growth, against the consensus expectation of 1,3 percent growth. The South African economy grew by 1,3 percent in 2017, exceeding National Treasury’s expectation of 1 percent growth. GDP in the first quarter of 2017 contracted by 0,7 percent.

“Mining and manufacturing data suggest Q1 GDP could shock the market negatively,” they stated.

In 2017, mining contributed 8 percent to South Africa’s GDP. Manufacturingaccounted for 13 percent.
– CAJ News

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