South Africa’s manufacturing contracted by more than expected and business confidence tumbled in data released on Thursday, casting further doubt over the economy a day after President Cyril Ramaphosa secured $24 billion of investment pledges.
Industrial output fell 2.4% year-on-year in September and by the same margin on a monthly basis, according to data from the statistics agency on Thursday.
A Reuters survey of economists had forecast a marginal 0.6% annual contraction and a 0.2% fall over the month.
All major sub-sectors bar food were down, with a notable swing in iron ore products to a 4.8% contraction from a positive contribution in the previous month. Textile, furniture and wood products also showed steep declines.
Earlier, a business confidence survey for October showed investors and managers were downbeat about the economy, mainly over decreased export and import volumes, a weaker exchange rate depreciation, and electricity supply disruptions after Eskom again cut nationwide supply.
“Today’s data is indicative of a very, very weak economic macroeconomic climate,” said BNP Paribas analyst Jeffrey Schultz.
“It means manufacturing probably detracted from GDP in the third quarter, which is worrisome, especially how that feeds into the fiscal.”
In his budget speech last Wednesday Finance Minister Tito Mboweni slashed the 2019 gross domestic product (GDP) forecast to 0.5% from 1.5%, announced a larger budget deficit and public debt rocketing to more than 70% of GDP in the next three years.
Analysts say some of the pledges at the annual investment summit are just regular operating costs and are unlikely to boost economic growth and employment significantly in the short-term.
“Ramaphosa keeps speaking about reforms but now need to see the implementation,” said economist at ETM Analytics Kieran Siney.
“The investment summit has been encouraging but realistically, it won’t make the kind of structural impact needed to turn things around.”