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Mining and manufacturing output higher in January but lower than a year ago

Mining and manufacturing output was higher in January although this output was lower than a year ago.

Mining output increased by 4.4% in January compared to the 1.3% in December, while manufacturing output increased by 1.1% in January, although it was 3.7% lower compared to January last year.

Annual mining production decreased by 1.9%, marking the 12th consecutive contraction due to a decline in PGMs (-15.2% and contributing -3.5 percentage points) and diamonds (-15.5% and contributing -0.9 percentage points).

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Seasonally adjusted mining production decreased by 0.5% in the three months ending January 2023 compared to the preceding three months, while seasonally adjusted mineral sales at current prices fell by 7.2% during the same time. Mineral sales at current prices increased by 6.8% in January compared to January last year.

Economic research group, Oxford Economics Africa, says elevated mineral prices supported the South African mining industry which, from a revenue-generating perspective, has struggled to produce meaningful growth over the past few years.

“However, less favourable external conditions suggest that the country can no longer rely on another global upswing in commodity prices. Total mining production contracted by 7.2% in 2022, compared to an increase of 11.6% uptick in 2021 and a decrease of 10.4% in 2020.”

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Mining second-worst performing sector

National accounts data for the fourth quarter showed that the mining sector was one of the laggards in the fourth quarter, contracting by 3.2% quarter-on-quarter.

“Although the January uptick in mining output bodes better for the sector in the first quarter, South Africa’s mining industry remains in decline.”

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The group points out that mining is the second-worst performing sector, remaining 8.1% smaller compared to pre-pandemic levels.

“Domestic infrastructure failures are undermining growth and the operational performance of Transnet and Eskom, that are salient role players in the mining industry, continued to deteriorate over the past year and the odds of an imminent improvement are slim.”

Oxford Economics Africa says South Africa’s manufacturing sector is taking strain due to incessant rolling blackouts and the industry contracted by 0.9% compared to the previous quarter, slashing 0.1 percentage points off GDP growth in the fourth quarter.

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Seasonally adjusted manufacturing production increased by 1.1% in January compared to a 0.5% increase in December. Output decreased by 3.7% on an annual basis, compared to a 4.5% year-on-year contraction in December.

The largest negative contributors to the annual decrease were petroleum, chemical products, rubber and plastic products (-10.8% and contributing -2.5 percentage points), motor vehicles, parts and accessories and other transport equipment (-7.6% and contributing -0.7 percentage points) and basic iron and steel, non-ferrous metal products, metal products and machinery (-3.7% and contributing -0.7 percentage points).

Seasonally adjusted manufacturing production decreased by 1.0% in the three months ended January 2023 compared to the preceding three months and Stats SA noted that five of the ten manufacturing divisions reported negative growth rates over this period.

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Manufacturing on the back foot

“We expected manufacturing production to increase at the start of the new year, in line with the results from the January manufacturing PMI.

“However, output is likely to come under pressure in February, after South Africa’s seasonally adjusted Absa purchasing managers’ index (PMI) fell to 48.8 index points in February 2023, compared to 53.0 in January,” the group says.

February’s survey period included an unprecedented bout of stage 6 load shedding and the salient business activity index (45.5) slipped into contractionary territory while the new sales orders index was little changed at 49.4 in February.

Oxford Economics Africa says South Africa’s manufacturing industry ended 2022 on the back foot, contracting by 0.9% quarter-on-quarter in the fourth quarter and detracting 0.1 percentage points from GDP growth.

“Half of the manufacturing divisions reported negative growth rates during the final quarter of 2022, with the food and beverages division weighing most on the sector. Incessant power outages are especially damaging to food producers, which will hold serious implications for food price inflation this year.”

The group points out that after construction and mining, manufacturing is the third worst performing sector, remaining 6.8% smaller compared to pre-pandemic levels.

NOW READ: Drop in economic transactions signals SA’s deteriorating economic activity

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By Ina Opperman
Read more on these topics: manufacturingmining industry