The slowdown in global economic activity and demand combined with load-shedding in the domestic economy has weighed on mining and manufacturing production in the country.
Stats SA reported on Thursday that mining production decreased 9.3% in March 2022 compared with March 2021. This is the steepest decline in mining activity since June 2020.
Stats SA said the year-on-year decline was led by decreases in gold, iron ore and manganese ore.
Both mining and manufacturing production data provide clarity on how the economy has performed in the first quarter of the year. The quarter-ending prints are set to confirm whether the sectors are going to add or subtract from quarterly GDP growth.
FNB said both sectors experienced a strong start to the year, but saw activity slow and even contract sharply in the case of mining, in February.
FNB economists said on the mining front, the prolonged strike at Sibanye-Stillwater’s SA gold mining operations depressed gold output.
The company reported that quarter one gold output plunged about 45% year on year, while quarter two production will also be negatively affected by the strike that has now lasted for two months.
In April, Stats SA reported that mining output fell 6% in February from a year earlier and 6.4% month on month, while economists surveyed had been expecting 0.1% growth.
FNB expected mining output to have contracted by between 3.2% and 6.4% in March.
SA’s economy was hit by major disruptions in April, most notably devastating flooding in KwaZulu-Natal and also several days of load-shedding.
Stats SA reported that manufacturing production decreased 0.8% in March 2022 compared with March 2021, reversing from an upwardly revised 0.7% growth in the prior month and surpassing market forecasts of a 0.9% fall.
The agency said the largest negative contributions were made by motor vehicles, parts and accessories as well as other transport equipment divisions.
FNB expected manufacturing production to fall 1.4% year on year in March, following growth of 2.0% on an annual basis in both January and February.
The bank said growth in manufacturing production was constrained by higher input and transportation costs and the prevalent raw material shortages from supply chain pressures amid Covid-19 and Russia’s invasion of Ukraine.
Nedbank said it expected factory activity to decline 0.9% in March 2022 compared to March 2021.
Just last week, Absa said its purchasing managers index (PMI) dropped to a barely positive 50.7 in April, down from 60.0 in March.
This is the lowest PMI reading since July 2021, when production was affected by looting and rioting in KwaZulu-Natal and parts of Gauteng, as well as stricter lockdown regulations.
The April PMI print showed that business activity fell to well below the 50-point mark, implying a drop in actual manufacturing output on a monthly basis.
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