Picture: THINKSTOCK
Picture: THINKSTOCK

AFTER a slowdown last year, there will be no easygoing for the economy in the first six months of this year, two surveys showed on Thursday.

Manufacturers and traders expect the business environment to deteriorate further.

The South African Chamber of Commerce and Industry’s (Sacci’s) trade expectations index, which surveys traders on their forecasts for six months, fell seven points to 42 last month. Traders expect sales and new orders to decline because of weak demand.

And a component of the Barclays manufacturing purchasing managers’ index (PMI) on expected business conditions remained below 50 for a second consecutive month.

The manufacturing outlook for SA was likely to remain difficult, given weak domestic demand and a challenging international environment, Barclays Africa economist Miyelani Maluleke said.

Growth in household spending is expected to be modest as consumers grapple with rising interest rates and food prices. Looming electricity tariff increases will also erode disposable incomes.

Input costs and selling prices were expected to rise in the first half of this year, Sacci economist Richard Downing said.

Low confidence levels among traders suggest that investment and job creation will be strained and that economic growth will slow further. Subdued demand, lower export volumes, rand depreciation, escalating interest rates and slowing growth in household spending weighed on confidence and the economy.

Manufacturers surveyed for the Barclays PMI also indicated that input costs were rising due to a weaker rand. Although the PMI rose last month to 45.5points, it was still below the 50-point mark showing expansion.

This suggested manufacturing production could have contracted in the fourth quarter of last year, trimming gross domestic product over the period, Barclays said.

The indices were released as Statistics SA data showed that mining production fell in November compared with a year ago, although at a slower pace than it did in October.

Earlier this week, data showed the manufacturing sector was on the cusp of a recession.

The contractions in mining and manufacturing — together they make up 20% of the economy — coupled with the drought, did not bode well for overall economic growth, Mr Maluleke said.

Mining production fell 0.8% in November last year compared with the same month the year before, after contracting sharply by 4.7% in October. Low commodity prices, high production costs and lacklustre global demand are among factors that will curb output.

Aside from these global headwinds, labour unrest was a major risk for mining, said Investec economist Kamilla Kaplan.

"In particular, the platinum industry will enter into wage negotiations this year, as the last three-year agreement expires by midyear."

Platinum-mining suffered from a five-month strike in 2014, which dented output and economic growth severely.