South Africa’s economic growth for the second quarter could stagnate with the productive sectors such as manufacturing and mining failing to grow in May due to slow demand, in spite of consistent supply of electricity.
Data from Statistics South Africa (Stats SA) yesterday showed that manufacturing production fell by 0.6% in May compared to the same month a year ago, following a downwards revised 4.9% rise in April.
Stats SA’s director of industry statistics Nicolai Claassen said six of the 10 manufacturing divisions recorded a decline in production, with the metals and machinery and automotive divisions the biggest drag on growth.
“Manufacturers in metals and machinery products recorded a decrease of 8.1% year on year and the automotive division registered a year-on-year decline of 11.8%,” Classen said.
“On the upside, four divisions recorded a positive month. These include food and beverages, wood, paper, printing and publishing, petroleum, chemical, rubber and plastic products, and glass and non-metallic mineral products. Food and beverages recorded the highest growth rate, expanding by 7.2% year on year,” he said.
On a monthly basis, seasonally adjusted manufacturing production plunged by 3.2% in May, 2024 compared with April, 2024 the largest monthly decrease since October, 2022 when production declined by 5.6%.
Seasonally adjusted manufacturing production decreased by 0.4% in the three months ended May, 2024 compared with the previous three months.
FNB senior economist Thanda Sithole said that 0.7% year-to-date manufacturing output growth was “consistent with our view of sub-1% growth this year, underscoring weak domestic demand and unsupportive external conditions”.
“We expect a gradual recovery over the medium term as demand conditions improve and energy-supply constraints ease further. In the June manufacturing PMI data, manufacturers expressed optimism, anticipating improved operating business conditions over the near term,” Sithole said.
South Africa’s gross domestic product (GDP) decreased by 0.1% in the first quarter dragged by the manufacturing industry, and its continued decline could see the three months to June plunging into a recession.
Meanwhile, Stats SA said mining output remained flat in May following an upwards revision of 1.4% in April.
Stats SA’s principal service statistician Jean-Pierre Terblanche said the main positive contributors were coal and chromium ore, while gold and platinum group metals were the main negative contributors.
“Coal production grew by 7.0% year on year, making a positive contribution of 1.6 percentage points to overall mining growth,” he said.
“Gold production declined by 9%, pulling overall growth down by 1.3 percentage points and PGMs were down by 4.1%.”
On a monthly basis, seasonally mining production eased by 0.6% in May, following a month-on-month increase of 0.8% in April.
Investec economist Lara Hodes said six of the 12 mineral categories included in the index contracted when compared to the same period last year, leading to the disappointing result.
“Domestically, the energy-intensive mining sector has benefited from an improvement in electricity supply over the past few months, however it continues to face a number of other structural challenges including fragile water-supply infrastructure and logistical constraints,” Hodes said.
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