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Manufacturing did better than mining in January, but it is not really good news, as both industries are visibly weak with the latest numbers for 2024 aligning with the trend of choppy economic data throughout 2023 that indicate a stagnant economy.
Seasonally adjusted mining production decreased by 0.8% in January 2024, compared to the 4.6% slump compared to November that was recorded in December. Annual output was down 3.3% after the 0.2% year-on-year increase in November. The largest negative contributors to the annual decline were:
Seasonally adjusted mining production inched higher by 0.1% during the three months ended January 2024 compared to the preceding three months. The largest positive contributor was coal that increased by 3.9% and contributed 1.0 percentage point.
Meanwhile, manganese ore decreased 6.8% and contributed -0.5 of a percentage point and gold decreased 3.5% and contributed of a -0.5 percentage point were notable negative contributors.
Jee-A van der Linde, senior economist at Oxford Economics Africa, says national accounts data showed that the mining sector contributed positively to overall gross domestic product in the fourth quarter of 2023, growing 2.4% compared to the third quarter, buoyed by increased production of the platinum group metals (PGMs) chromium ore, coal and diamonds.
“However, the January mining output numbers mark a soft start to 2024, with dismal data expected for February given that load shedding intensified during the month. Looking ahead, it is likely to be another dreary year for the industrial sector as total mining output declined 0.4% in 2023, following the 7.2% contraction recorded in 2022.”
ALSO READ: Mining output positive in fourth quarter despite sharp fall in December
Manufacturing production increased 2.6% in January compared to January 2023. The largest positive contributions were made by:
Seasonally adjusted manufacturing production increased 0.8% in January 2024 compared to December 2023 after month-on-month changes of -1.3% in December 2023 and 0.9% in November 2023.
Manufacturing production increased 0.2% in the three months ended January 2024 compared to the previous three months, with seven of the 10 manufacturing divisions reporting positive growth rates over this period.
The largest positive contribution was made by the food and beverages division that increased 3.3% and contributed 0.7 of a percentage point and the largest negative contribution by the basic iron and steel, non-ferrous metal products, metal products and machinery division that decreased 3.1% and contributed -0.7 of a percentage point.
Seasonally adjusted manufacturing sales decreased by 1.4% in January 2024 compared to December 2023 after month-on-month changes of 1.2% in December and 1.4% in November 2023.
Manufacturing sales increased 1.6% in the three months ended January 2024 compared to the previous three months. The largest positive contributions were made by motor vehicles, parts and accessories and other transport equipment that increased 6.6% and contributed 1.1 percentage points and food and beverages that increased 2.5% and contributed 0.6 of a percentage point.
ALSO READ: Shocking fall in manufacturing output in December
The largest negative contribution came from the petroleum, chemical products, rubber and plastic products division that decreased 4.4% and contributed -0.9 of a percentage point.
Van der Linde says the uptick in manufacturing came despite a sharp drop in South Africa’s manufacturing Absa PMI during January. “Looking ahead, February saw a sudden intensification in load shedding which would have disrupted production and weighed on economic activity.”
The Absa PMI fell by 7.3 points to 43.6 index pts in January 2024. However, Van der Linde says, the headline PMI recovered sharply in February to reach 51.7 percentage points following the extraordinarily steep drop.
“This improvement implies that manufacturing activity expanded in February although Eskom escalated load shedding to Stage 6.”
Meanwhile, he says, total manufacturing production was up 2.6% in January, primarily thanks to favourable base effects. The outcome was better than the consensus forecast of 0.7% year-on-year.
“Our base case remains for the South African economy to grow 0.7% in 2024 as undue supply-side issues continue to undermine growth for most of the year. We believe that the current state of affairs will persist, in varying degrees, over the near term,” Van der Linde says.
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