Positive Growth Indicators: Mining and Manufacturing Rise Boost Q2 GDP

Mining Production Insights

Despite mining production showing a significant decline on a year-on-year basis, there has been a positive shift in month-on-month output for two consecutive months, particularly in April. This trend is expected to contribute positively to GDP growth, according to Lisette IJssel de Schepper, the chief economist at the Bureau for Economic Research (BER).

A Look at Retail Sales

The retail sales sector began the second quarter on a surprisingly strong note. This boost may be fueled by renewed access to retirement savings through the two-pot system. However, a slight decline in momentum is anticipated in May as this initial advantage begins to wane.

Manufacturing Production Growth

Statistics South Africa reports a year-on-year factory output increase of 0.5% in May, rebounding from a downwardly adjusted contraction of 6.4% in April. This outcome surpassed analyst forecasts of a 1.5% decline. Nkosiphindile Shange, an economist at BER, highlights that this marks the first positive manufacturing growth in 2025.

Subsector Performance

While five subsectors in manufacturing contracted, the other five saw growth, notably the metal subsector, which reported a 4.3% increase contributing 0.9 percentage points to overall growth. On the contrary, the motor vehicles and transport equipment subsectors faced a contraction of 6.7%, detracting 0.6 percentage points from growth.

Output in the manufacturing sector grew by 2% month-on-month in May, building on an upwardly revised growth rate of 1.7% from April. This consecutive increase is promising for GDP contributions in the second quarter.

Commodity Market Changes

On a different note, copper futures have experienced their most significant intraday rise in decades, with a record high following the US government’s announcement of a 50% tariff on copper imports. The US currently relies on imports for around 60% of its copper needs, although it’s unclear which specific types of copper will be affected by the tariffs.

Tariffs on South African Goods

The US also imposed 30% tariffs on South African products with an implementation date set for August 1. Initially viewed as a potential 10% universal tariff, the situation looks precarious for certain sectors. While the overall impact may be minimal for South Africa’s economy, specific areas like motor manufacturing and agricultural produce could face significant challenges.

The US has expressed willingness for further negotiations, although it has rejected President Cyril Ramaphosa‘s claims regarding the inaccuracies of data that influenced tariff decisions.

Economic Speculations

Donald Trump has stated that additional tariffs may be imposed on countries aligning themselves with the anti-American sentiments of the BRICS Plus bloc. After announcing the new tariffs, the rand experienced a sharp decline, although it later recovered.

Global financial markets appeared relatively stable despite the ongoing announcements, possibly anticipating that the situation would stabilize. If the tariffs prove harsher than projected, this may trigger concerns regarding trade with major partners like the EU and India.

Following the US’s April tariff announcements, the EU threatened to retaliate if necessary, although China has been the most active in securing favorable trade terms following tariff impositions.

Oil Production Updates

Recently, the Organisation of the Petroleum Exporting Countries Plus announced an increase in crude oil production by approximately half a million barrels per day starting in August. However, this decision did not substantially impact oil prices, as markets await clarity on production adjustments.

In the US, revisions to near-term crude production estimates suggest record highs are still achievable. However, geopolitical tensions, such as attacks in the Red Sea, are contributing to rising fuel prices.

Inflation and Economic Policy

During the National Treasury’s budget vote, Finance Minister Enoch Godongwana discussed potential changes to the inflation target framework. He emphasized that while low inflation benefits the economy, changes to the target should be approached carefully and not rushed.

Lisette IJssel de Schepper remarks that now may be the right time to reconsider the inflation target framework, despite acknowledging the near-term costs involved.

What do you think about the current trends in mining production and their impact on the economy? Would love to hear your thoughts.