ECONOMISTS warn that headwinds still lie ahead for the mining sector, despite stronger production figures released on Thursday.
Statistics South Africa figures released on Thursday showed that mining production improved by 6.7% year on year in July, after a revised 4.7% (4.2%) year-on-year increase in June.
This was the third consecutive month that mining production rose on a year-on-year basis.
On a month-on-month basis, mining production fell 1.5% in July from a 1.7% rise in June, indicating the volatile nature of the figures.
Standard Bank economist Shireen Darmalingam said the fact that seven of the 12 categories reflected a slowdown in momentum during the month of July signalled production in the sector remained under strain, despite the improvements reflected in the year-on- year numbers.
She referred to the better year-on-year figure as "a likely consequence of a normalisation" in mining production, after work stoppages related to labour disputes and safety stoppages in the first quarter, which disrupted production.
Ms Darmalingam said the effects of the Marikana work stoppages were likely to be seen in the September and October mining production numbers.
"In addition, industrial action, now spreading across the sector, in the third quarter is likely to have a negative impact on mining production during the quarter," she said.
The work stoppages could also lead to a dismal contribution to third-quarter economic growth by the sector after it contributed 1.5 percentage points to the 3.2% growth recorded in the second quarter of this year.
Head of research at the Reserve Bank, Rashad Cassim, this week agreed that the boost given by the mining sector to economic growth in the second quarter was not likely to be repeated in the third quarter.
Work stoppages were not the only factor plaguing the sector. A general slowdown in global demand and volatile commodity prices were also negatively impacting on the sector.
Nedbank economist Busisiwe Radebe said softer commodity prices, supply disruptions related to the Marikana developments, and generally difficult operating conditions in the domestic mining sector would continue to undermine the performance of mining production in the months ahead.
She did not see the mining figures as having much influence on interest rate decisions in the short term due to their volatility.
"We expect the monetary policy committee (MPC) to adopt a wait-and-see approach, ready to act if global conditions worsen dramatically," she said.
The MPC meets next week and a decision on the interest rate is expected on Wednesday.
Consensus is for the repo rate to remain unchanged at 5%.
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