Weekly economic wrap: Bad news everywhere, but gold shines

Ina Opperman

By Ina Opperman

Business Journalist


Budget 2025 also did not bring any good news for consumers and the economy, with economic growth revised downwards.


The week was filled with bad economic news as the world gets to grips with the Trump trade tariffs and the Budget 2025 announcement on value-added tax (VAT) increases that will hurt consumers’ pockets, but at least all the volatility makes gold shine even brighter.

Lisette IJssel de Schepper, chief economist at the Bureau for Economic Research (BER) says this week’s domestic data batch suggests that the economy had a mixed start to 2025 but certainly not the bump required to see a significant growth boost. As a result, the BER downwardly revised its growth outlook for 2025.

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Gold shines while oil falls

Bianca Botes, director at Citadel Global, says gold prices continued their upward trajectory, reaching fresh all-time highs on Thursday as investors sought refuge in safe-haven assets amid market volatility and geopolitical uncertainty. Gold futures traded at $2,989.74/ounce on Friday morning, up 2.7% for the week.

Conversely, she points out, oil prices suffered sharp declines due to fears of slowing global demand exacerbated by US-China trade tensions and weaker economic data from China. Brent crude fell below the $69/barrel on Tuesday before rebounding to just above the $70/barrel mark on Friday morning, gaining some traction as Ukraine ceasefire deal remains uncertain.

Isaac Matshego and Busisiwe Nkonki, economists at the Nedbank Group Economic Unit, also say that Brent crude oil decreased as the trade war heightened fears of an economic slowdown affecting energy demand, while gold set a record high of $2 989.20 an ounce as the metal benefits from its safe-haven status.

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Currencies getting tired of trade war

Botes also notes that currencies seem to be getting weary of the trade tension, but the rand remained fairly stable following its retreat last week, ending the week in the green, despite some volatility during the week.

Matshego and Nkonki also note that the rand was firmer early in the week as the US dollar lost further ground on worries about the likely impact of the US trade war with its key trading partners.

“However, the local unit lost 0.7% to R18.31/$ on Wednesday after the finance minister presented the Budget 2025 speech, which showed that despite limited expenditure restraint, the expenditure targets would likely be missed, while it effectively raised taxes on individuals.”

The rand was trading marginally firmer at R18.17/$. Meanwhile, the US dollar fell to $1.09/euro on Tuesday, its lowest level since 5 November, just before Donald Trump won the US elections, due to concerns about the likely negative impact of the Trump administration’s trade war on the US economy.

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Mining production falls again in January with large drop in gold sales

Mining production started the year on the back foot again, falling by 2.7% in January after consecutive declines of 0.9% in November and 2.4% in December. On a seasonally adjusted basis, mining production contracted by 1.2% in January, after a 3.7% drop in December.

Nadia Matulich, economist at the BER, says the annual decline was primarily driven by sharp decreases in the production of iron ore (-15.1%), platinum-group metals (-2.8%) and coal (-4.4%). “In contrast, manganese ore was the largest positive contributor, increasing by 21.2%.”

Matshego and Nkonki point out that mining and manufacturing production started the year on a weak footing, contracting despite the improvements in electricity generation of 5.7%. They say the decrease was worse than their expectation of +0.9%.

“Over the three months ending in January, production was down 3.5%. Mineral sales fell by 5.9%, driven by a 21.1% drop in gold sales. However, mineral sales are still trending up and increased by 6.8% over the last three months.”

Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, say mining output grew by 0.3% in 2024 after contracting by 0.5% in 2023. “We believe there is scope for further modest growth this year as the global economy stabilises and domestic supply-side reforms help to ease bottlenecks.”

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Manufacturing production also decreased in January

Manufacturing production also decreased in January as well as on an annual basis, with output falling by 3.3% in January after decreases of 1.9% in November and 1.2% in December.

However, output increased slightly on a monthly basis by 0.2%. Matulich says the biggest drag was the petrochemical subsector (-9.1%), food and beverages (-3.2%) and transport (-10.1%). The largest positive contributor was wood and paper, which grew by 5.6%.

“It also remains to be seen how the closure of ArcelorMittal’s long steel business will work through the industrial side of the economy and what the (negative) knock-on effect will be.”

Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say this weak start to 2025 is consistent with their downwardly revised gross domestic product (GDP) growth outlook to 1.7% from 1.9% this year and suggests that the manufacturing sector is not out of the woods yet.

They say while the Manufacturing PMI Business Activity Index remains below the neutral 50 mark, indicating that activity in the sector remains constrained, the expected business conditions index stands at 60.5 points, suggesting that manufacturers are modestly optimistic about operating conditions in the near term.

“After contracting by 0.5% in 2024 and weighing on overall GDP growth, we expect a modest recovery of nearly 1.0% in manufacturing activity, supported by improving domestic demand, including fixed investment, as well as easing supply-side constraints.”

Matshego and Nkonki point out that petroleum, chemicals, rubber and plastics, as well as food and beverages and motor vehicles, parts and accessories, shaved 3.7 percentage points off the total. Manufacturing sales decreased by 1.9% compared to a year ago.

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Marginal increase in Building Confidence Index

The FNB/BER Building Confidence Index registered a marginal increase to 41 points in the first quarter of 2025 from 40 points previously, reflecting a largely stable but persistently subdued sentiment within the building sector, Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say.

“Subsector performance was mixed: hardware retailers, quantity surveyors and building subcontractors reported higher confidence, while main contractors, architects and building material manufacturers experienced declines.

“Despite a contraction in current main contractor activity, optimism regarding near-term prospects remains, corroborated by increased architect activity indicative of potential future demand. However, concerns regarding municipal inefficiencies and the potential for unfulfilled expectations pose risks to the near-term outlook.”

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