Picture: THINKSTOCK
Picture: THINKSTOCK

GROWTH in retail sales fell unexpectedly in October, but this was partly offset by official figures showing that manufacturing production held up surprisingly well during the month.

Mining output plunged, reflecting the effect of prolonged strikes during October and driven by a contraction of about 46% in gold production.

The data released on Tuesday point to an economy struggling to expand in the face of weaker consumer spending and slackening global demand for locally manufactured exports.

It also suggests that economic growth may continue to slow during the fourth quarter, after weakening to 1.2% in the third quarter — its lowest pace since the recession in 2009.

"Definitely, when we look at the production and demand sides of the economy we can see they are both under pressure," Nedbank economist Isaac Matshego said on Tuesday.

Retail sales fell 1.7% during October after a 0.3% dip in September, well below consensus forecasts for a 0.4% increase, the figures from Statistics South Africa showed. Compared with the same month last year, retail sales growth slowed to 1% from 4.7% in September — which was its lowest increase in almost two years. The poor performance largely stemmed from slower growth in sales of hardware, paint and glass; clothing and textiles; and food, beverages and tobacco from specialised stores.

The retail sector will continue to be hampered by lower household income growth, rising inflation and a poor employment outlook — South Africa’s jobless rate climbed to 25.5% in the third quarter of this year from 24.9% in the second.

Statistics SA said mining output fell 7.7% year on year during October after a contraction of 7.2% in September.

Mining only accounts for about 5% of economic output, but the sector accounts for more than half of South Africa’s exports. The trade deficit widened to a record R21.1bn in October, partly due to a sharp fall in platinum and gold exports.

"Our view on the mining sector is largely negative. South Africa’s mines are faced with weak commodity prices and slowing global demand," Standard Bank said in a research note on Tuesday.

Sharp increases in electricity prices will burden mining companies, which also face the possibility of further taxes mooted by the African National Congress, which are due to be decided at its conference next week.

Manufacturing production rose 1.2% in October after shrinking 2.8% the previous month, Statistics SA said.

Compared with the same month last year, output rose 2.5% after falling 1.7% in September.

Analysts said the annual figures may have been "flattered" by the fact that there were two extra working days in October this year compared with the same month last year.

Underlying conditions remained unfavourable and would continue to take a toll on the sector in the months ahead, they said.

"Weaker global growth will continue to hurt the large export-orientated industries, while softer domestic spending and the lingering effects of disruptions in local production will place some pressure on those manufacturers producing goods for the domestic consumer market," Mr Matshego said.

A recovery in infrastructure spending by the government could offer some support, but the benefit would be contained by slower capital expenditure from the private sector in response to the bleak environment in South Africa and abroad, he said.

Standard Bank said it was "concerning" that more than 300,000 manufacturing jobs had been shed or exported to other countries since the beginning of 2008.

Weakness in the rand is normally seen as a boon for manufactured exports, but its volatility this year also made it difficult for local manufacturers to design medium-term strategies, the bank said.

The rand has weakened by more than 6% against a trade-weighted basket of currencies so far this year, according to data from Bloomberg.

Standard Bank also maintained that local manufacturers found it difficult to remain competitive at a time when administered prices were being cut in competing markets.

"The outlook for 2013 is not promising," it said.

The figures showed that production in food and beverages; basic iron and steel; metal products and machinery; and motor vehicles and parts all contracted.

However, wood, paper, publishing and printing, as well as petroleum, chemical products, rubber and plastic products continued to show growth in output.