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Wed Aug 24 08:24:44 SAST 2016

Mining and manufacturing data likely to reflect downturn in sectors

TMG Digital | 10 January, 2016 14:10
Sun sets behind a shaft outside the mining town of Carletonville
The sun sets behind a shaft outside the mining town of Carletonville, west of Johannesburg, July 7 2015.
Image by: SIPHIWE SIBEKO / REUTERS

Economic data due for release this week is likely to reflect that the performance of the country’s mining and manufacturing sectors has been hampered by subdued demand conditions‚ according to Investec economist Kamilla Kaplan.

She says the manufacturing PMI survey for December scheduled for release on Thursday is likely to continue indicating a contraction in manufacturing sector activity.

“Specifically‚ the PMI gauge is estimated at 45.0 versus a prior level of 43.3. As such‚ in the 2015 fourth quarter period as a whole‚ activity in the sector is expected to have fallen‚ signalling that the sector may detract from 2015 fourth quarter GDP growth‚” says Kaplan.

The manufacturing production figures for November are also due this week on Tuesday and‚ based on the advance indications provided by the PMI‚ actual production is estimated to have fallen by 1.5% year on year‚ after declining by 2.1% year on year in October‚ Kaplan says.

“The performance of the manufacturing sector has been affected by adverse demand conditions. Suppressed market conditions in the agriculture‚ commodity and energy industries are reflected in dampened demand for manufactured goods. Weaker demand has also stemmed from the consumptive sectors of the economy‚ with the consumers’ ability to spend inhibited by the rise in the cost of living‚ high levels of indebtedness and rising taxes and interest rates.

“Export orientated manufacturers have been contending with the slow rate of expansion in global new export orders‚ as determined by the global manufacturing PMI survey. This concurs with recent assessments by the OECD and the World Trade Organisation‚ of weaker global growth prospects and sedate growth in global trade. Similarly‚ the World Bank‚ this week‚ downgraded its forecast for world trade volume growth in 2016 to 3.8% from a prior estimate of 4.9%‚” Kaplan notes.

Mining production figures for November‚ which will also be released on Thursday‚ are similarly expected to reflect a continued downturn‚ with an estimated outcome of -4.6% year on year‚ she believes.

“Mining sector activity has been hampered by weaker demand‚ particularly for industrial commodities‚ from major commodity importing countries such as China. China’s economic transition to a consumer and services driven economy‚ from an infrastructure and manufacturing led economy‚ has been associated with the decline in commodity demand and prices.

“This effect on local mining producers is exacerbated by domestic challenges relating to rising operating costs and insufficient electricity supply‚” says Kaplan.

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