Economic worries grow as mining output sinks

Economic worries grow as mining output sinks

2014-09-11 13:41

Johannesburg - Mining output fell more than expected in July, hitting levels last seen in late 2012 and compounding doubt about whether the Reserve Bank will hike interest rates next week as the economy suffers.

Mining output dropped 7.7% year-on-year in July from a revised 5.4% decline in June, Statistics South Africa said, with output largely hit by platinum group metals, which fell more than 45%.

Economists polled by Reuters had expected mining output to contract 6.35%.

The data increases concerns about the health of the economy, which is still struggling to recover from the effect of a five-month strike in the platinum industry this year. The number comes just days after the release of a wider-than-expected current account deficit for the second quarter.

Read: Current account deficit shock

"Where oh where is the growth in South Africa? Despite the end of the (platinum) strike, output is still deeply negative year-on-year, including in July," said Razia Khan, head of Africa research at Standard Chartered.

"So after a pretty disastrous Q1 and Q2 contribution to GDP, mining's contribution to GDP growth in Q3 is not looking especially good."

Earlier this year the Association of Mineworkers and Construction Union (Amcu) downed tools for higher wages at the world's top three platinum producers - Implala platinum, Anglo American Platinum and Lonmin - in the longest strike in South African history.

Read: Amcu strike: Stakes could hardly be higher

The mining sector entered recession in the second quarter of 2014 and helped to drag the whole economy into contraction in the first three months of the year.

GDP managed a 0.6% expansion in the second quarter, effectively putting growth at zero in the first half of the year.

Read: Strike stole SA's economic growth

The Reserve Bank will meet to decide on monetary policy next week, and although the bank has announced a tightening cycle to try and stem high inflation, poor growth indicators could cause it to pause on hiking until next year, economists said.

The rand weakened after the data and was trading at R10.9530 to the dollar at 10:10 GMT, down over 0.2% on its previous close.

Read: Rand softens as investors brace for data

  • Terence Wessels - 2014-09-11 13:57

    Further into the pit called poverty. Proudly being dug by ANC.

  • John Williamsii - 2014-09-11 14:19

    Google "Almost 30% of the country's entrepreneurial businesses shut their doors last year" You have a socialist government that is clueless about capitalism and making money and doing business. Open a capitalistic textbook and start reading! Lower business taxes to 15%! Your business tax rates is almost everything in the economy. It's like petrol for a car. You can have a sports car, if there's no petrol for that car, that car isn't going to move.

  • nicolas.kritzinger - 2014-09-11 20:58

    Why dont we start another strike somewhere?? That should fix this little problem!!

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