- Siphiwe Sibeko/Reuters
South Africa just saw a slew of ugly economic data.
Mining production fell by 2.9% year-over-year in October, a huge drop from the prior month’s increase of 4.7%. None of the analysts polled by Bloomberg expected a fall in output, with a median forecast of 2.7% growth.
Moreover, manufacturing production fell by 1.9% year-over-year in October, below economists’ expectations of an uptick of 0.4%, and a drop from the prior month’s reading of 1.5%.
“October’s mining and manufacturing data were both worse than even the most pessimistic analysts had expected. This suggests that, after a very week Q3, the economy may have slowed even further in Q4,” wrote John Ashbourne, Africa economist at Capital Economics, in a note.
South Africa’s economy is “headed for a brutal end to the year,” he added.
- Capital Economics
Looking under the hood of the manufacturing data, a big chunk of the slump came from the automotive sector, which saw output drop by 9.9% year-over-year.
This is significant given that car production previously was a strong performer within an otherwise floundering manufacturing sector. You can see this change boxed in the adjacent chart.
As for what this means for South Africa going forward, Ashbourne writes that Thursday’s data dump “supports our view that economic momentum will be very weak going into 2017 and that the South African Reserve Bank will probably keep its key policy rate on hold.”
The South Africa rand is down by 1.9% at 13.7211 per dollar as of 9:54 a.m. ET.
- Markets Insider