ECONOMIC WEEK AHEAD: Mining data to lag, manufacturing likely to hit 2008 lows

Mining, manufacturing and energy sectors reel from the impact of unprecedented load-shedding during the first quarter of the yearA cocktail of negative domestic and international factors tipped the mining and manufacturing sectors into contraction during March. It also set the manufacturing sector on course for its worst performance since the 2008/2009 global financial crisis.

The effect of electricity shortages, coupled with low household and corporate confidence, weaker domestic and global demand, higher electricity tariffs and rising fuel prices, are is forecast to have resulted in manufacturing contracting 8.4% quarter on quarter, which has been adjusted for seasonal variations.

The mining industry was hit by the ongoing strike in the gold sector at Sibanye-Stillwater, which ended in mid-April. The mine is SA’s largest gold producer and among the world’s top gold miners. NKC forecast a contraction of 16.5% for mining in the first quarter of this year amid weak commodity prices. This would be the industry’s worst reading in three years. Kruger predicted a contraction of 6.9% for March, this after the sector contracted by 7.5% year-on-year in February this year.

RMB economists Mpho Tsebe and Siobhan Redford said in a research note that the negative effect of intense power cuts meant that growth during the first quarter of this year may contract 1.7%. And for the year as a whole “this means that growth will need to average 2.2% over the next three quarters for 2019’s growth to be 1% year on year, which seems unlikely”.

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