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South Africa's Economy Gets Off to Slow Start in 2016

  • Reuters

FILE - A man walks past the Doornkop Gold Mine, about 19 miles west of Johannesburg. Mining output fell by 4.5 percent year-on-year in January, according to Statistics South Africa.

FILE - A man walks past the Doornkop Gold Mine, about 19 miles west of Johannesburg. Mining output fell by 4.5 percent year-on-year in January, according to Statistics South Africa.

South Africa's economy has had a sluggish start to the year, data showed Thursday, signaling tough times ahead for a country at risk of losing its investment-grade status because of slow growth.

Manufacturing output in Africa's most advanced economy unexpectedly contracted by 2.5 percent year-on-year in January after rising by a revised 0.5 percent in December, Statistics South Africa said.

Economists polled by Reuters had expected factory production to rise marginally by 0.2 percent.

On a month-on-month basis, manufacturing was down 1.8 percent, and was also down 1.1 percent in the three months to January compared with the previous three months, the statistics agency said.

"Weak demand, higher input costs and a death of confidence are all likely to continue to keep the manufacturing sector hovering around recessionary levels in 2016," BNP Paribas Securities economist Jeffrey Schultz said.

Statistics South Africa said mining output fell by 4.5 percent year-on-year in January.

Disappointing economic growth has heightened fears South Africa's credit rating could be cut to sub-investment grade and further unnerve investors concerned about President Jacob Zuma's handling of the economy.

The Treasury has said the economy could grow by 0.9 percent this year compared with an estimated 1.3 percent in 2015, which would be the lowest rate of expansion since South Africa emerged from a recession in 2009.

"The mining and manufacturing sectors collectively make up about half of South Africa's [gross domestic product], so this contraction in output is a very worrying sign," Capital Economics analysts said in a note.

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