Manufacturing production contracted in January in an early warning sign for the domestic economy, which only mustered lacklustre growth last year.
This might, however, be offset by sectors such as mining, which defied expectations during the same month as platinum group metal (PGM) producers ramped up operations to capitalise on the metals’ soaring prices.
Factory production contracted 0.7% month on month in January, largely the result of weak performances in the wood products, publishing and printing sectors, as well as basic iron and steel, Statistics South Africa said.
Thursday’s data followed the agency’s report earlier this week showing anaemic GDP growth of 1.1% for 2025 with manufacturing being the biggest dampener.
Wood and wood products, paper, publishing and printing slumped 11% year on year in January, while basic iron and steel, non-ferrous metal products, metal products and the machinery sectors were down 5.7% over the same period.
This was partly offset by petroleum, chemical, rubber and plastic products, which rose 6.7%.
Seasonally adjusted manufacturing production increased 1.5% in January compared with December, snapping two consecutive monthly declines.
Still, production fell 1.7% in the three months to end-January compared with the preceding three months, with seven of the 10 manufacturing divisions reporting a contraction in the period.
On Tuesday, Statistics South Africa reported that a 0.6% contraction in manufacturing helped restrict overall economic growth to 0.4% in the fourth quarter of 2025. The sector was also largely behind the sluggish expansion reported for all of 2025, which was 0.3 percentage points below the Treasury’s forecast of 1.4%.
The manufacturing sector, which contributes about 12%-14% to GDP, is bracing for higher production costs this year as the conflict in the Middle East rages on with no end in sight, pushing oil prices higher.
Prices rose above $100 a barrel again on Thursday as attacks on oil tankers in the Gulf shattered any prospects of an imminent de-escalation in the conflict, Reuters reported.
The latest disappointing factory production data comes in the wake of Absa’s purchasing managers index (PMI) for February that came in well below expectations, suggesting that despite a hopeful start to 2026, local factories are still too cautious about their outlook to increase investment or hire new workers in the near term.
The month-on-month improvement in manufacturing suggests manufacturing may have started the year on a slightly stronger footing, the Bureau for Economic Research’s Lisette IJssel de Schepper said, noting that this also aligned with the solid improvement in the business activity index of the Absa PMI in January.
But she cautioned: “However, the PMI slipped back again in February so it remains unclear whether the uptick in manufacturing activity will be sustained in the months ahead.”
The latest mining data from Statistics South Africa was, however, more upbeat, showing a 4.6% year-on-year increase in January, the biggest since October 2025, with PGM output the biggest driver. If sustained the buoyancy in the sector, which accounts for 7%-8% of GDP, could offset the downward pressure from factories.
But economists at Investec noted that the mining output increase was not broad-based and largely underpinned by the year-on-year rise in PGMs, manganese and chromium ore.
They further warned that while mining input cost inflation eased in January, with the rand strong and oil prices contained earlier in the year, the conflict in the Middle East presented notable “upside risks to input cost inflation from March”, with uncertainty elevated.
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