First-quarter GDP growth ‘very weak’ owing to ongoing platinum strike
Global banking and finance services organisation HSBC states that the impact of the ongoing strike in the platinum sector will continue to dominate overall mining production numbers in the next few months as the organisation expects mining to substantially detract from overall gross domestic product (GDP) growth in the first quarter of 2014.
Based on an HSBC report on South Africa mining and manufacturing released on April 10, HSBC points out that after two months of data, average seasonally adjusted mining output is down 5% from its levels in the fourth quarter of 2013, with the potential to fall further. This is despite mineral sales and exports having the potential to hold up better given the inven- tory levels at platinum mines affected by the strikes.
Owing to this, HSBC economist David Faulkner states that Africa’s 2014 first-quarter GDP growth is likely to be very weak as mining output contracted at a seasonally adjusted pace of 7.0% month-on-month and fell by 4.8% year-on-year.
“This substantially below consensus estimate predicts a fall of –0.5% in year-on-year production, which makes us expect that GDP will expand by just 0.2% quarter- on-quarter in the first quarter and that the economic growth of the country will likely be 1.8% for 2014,” he adds.
Faulkner highlights that in February, mining production contracted by 4.8% year-on-year from a revised expansion of 3.7% in January. The data was in line with HSBC’s estimate of a 4.5% contraction, but substantially below a consensus of –0.5%. On a seasonally adjusted monthly basis, mining output fell by 7.0% month-on-month with a consensus of –3.4% from a revised contraction of 3.7% in January.
Platinum-group metals output fell by 17.7% month-on-month and 35.8% year-on-year in February, while the output of coal changed a little in the month but contracted 4.8% year-on-year. Gold production was down 2.3% month-on-month but 3.6% lower year-on-year.
Iron-ore and some of the smaller metals and minerals – such as manganese, other metallic minerals, other nonmetallic minerals, and nickel – continued to contribute positively to the year-on-year production numbers.
“Contracting mining provides an early indicator of weak GDP growth in the first quarter of 2014. Looking at the first two months of the year, the weighted average of the mining output has fallen 1.7% from levels in the fourth quarter of 2013, implying a sharp moderation in headline GDP growth,” notes Faulkner.
He concludes that the production data highlights a bleak outlook for GDP growth in the first quarter and illustrates the downside risks to growth in the South African eco- nomy this year.
“Volatile mining output has tended to dictate headline GDP growth in recent quarters and years, and will be a factor at the start of 2014.”
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