South Africa lost more jobs in the second quarter, but the Absa PMI rebounded, while new vehicle sales, especially exports, did not disappoint.
The weak economic news of the week was mitigated by the rand gaining against a weak dollar this week, while gold was the shining star as investors returned to the safe haven of the yellow metal, spooked by the US government shutdown.
Tracey-Lee Solomon, economist at the Bureau for Economic Research (BER), says gold surged to another record high as the US government shutdown began.
She also noted that after last week’s sharp gains, oil prices finally retreated at the start of the week on expectations that OPEC+ will raise production again in November, fuelling concerns about oversupply.
Solomon says the rand also gained against a weak dollar this week, while optimism over an extension of the US-Africa trade pact, Agoa, may have helped buoy the rand. “It must be said that South Africa’s geopolitical position remains a risk.”
Bianca Botes, director at Citadel Global, noted that gold hovered near $3,860/ounce, holding close to record levels and poised for a seventh straight weekly gain. “Appetite for defensive assets (cash, bonds and gold) strengthened amid the US shutdown, which delayed major economic reports and heightened uncertainty.”
She points out that Brent Crude edged up roughly $64.40/barrel early this morning, although prices remain pinned near their lowest levels in four months. “The oil market is on track for its weakest weekly performance since June, with traders bracing for the possibility of OPEC+ increasing its output.
Botes says the rand is hovering near R17.31/$ after reaching levels as strong as R17.12/$ earlier in the week, its best level in over a year. The rand was trading at R17.23/$ this afternoon.
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No good news for employment – as always
According to Statistics SA’s Quarterly Employment Statistics survey, formal non-agricultural employment decreased by 0.8% in the second quarter, equivalent to a net loss of 80 000 jobs compared to the previous quarter (-229 000 compared to a year ago).
The most significant decline was observed in the community services sector (-53 000 jobs), followed by the trade sector (-10 000), manufacturing (-9 000), construction (-7 000), transport (-2 000) and business services (-2 000). Gross earnings rose by 3.4% in June, with basic wage/salaries up 3.6%.
Damian Maart, economist at the BER, says the broad-based decline in employment underscores the pressure faced by the private sector, worsening an already weak labour market.
Mamello Matikinca-Ngwenya, Siphamandla Mkhwanazi, Thanda Sithole and Koketso Mano, economists at FNB, expect that employment creation will likely remain subdued, with only mining and electricity adding jobs.
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Manufacturing PMI rebounds in September
According to the BER, factory sector activity regained momentum in September, with the Absa PMI returning to expansionary territory at 52.2 points, a 2.7-point increase from August.
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say that an improvement in domestic demand seemingly supported this recovery, and stable purchasing prices are also helpful. “However, this is only the second time the PMI has been positive, and manufacturers remain cautious about near-term conditions as trade restrictions and potential dumping weigh on the sector.”
Maart notes that the business activity sub-index surged by 12.1 points to 57.9, marking the first expansion since October 2024.
“This rebound was largely supported by a sharp rise in new sales orders, which climbed by 8.8 points to 56. The employment index declined by 6.1 points to 42.8, reflecting continued caution among manufacturers in hiring decisions as subdued domestic demand is unable to lift production.
“Meanwhile, the purchasing price index increased further, signalling mounting cost pressures from wages, raw materials and broader operational challenges, compounded by weaker-than-expected global demand.”
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Strong new vehicle sales data in September
According to Naamsa, new vehicle sales in September came in at 54 700 units, up 24.3%, the steepest acceleration since 2015. Surprisingly vehicle export volumes saw a significant increase of 32.9% compared to a year ago.
Nkonki and Matshego say new vehicle sales reached the highest level since September 2015, with 54 700 units sold in September, a sharp increase of 24.3%. Passenger vehicle sales led the gains. The upside for commercial vehicle sales will be contained by weak business confidence, higher US tariffs on South Africa and generally subdued fixed investment.”
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano point out that new domestic sales of passenger cars recorded the highest level of units sold since October 2014. “At 38 603 units, sales were up 28.0% and while some of this is explained by the tourism industry, strong demand for entry-level and affordable brands is supportive.
“Ultimately, households are showing a cyclical recovery, but monetary policy remains restrictive, and this is weighing on lending appetite and credit uptake.”
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Trade surplus narrows
The surplus trade balance contracted to R4 billion in August from R19.6 billion in July, well below the consensus of R18.3 billion. On a monthly basis, exports declined by -6.8%, while imports increased by 1.9%, narrowing the surplus recorded in the previous month.
Of the top five exported goods, only vehicles and transport equipment recorded an increase, with the highest exported goods, precious metals and stones, seeing a fall of 19% in August.
Matikinca-Ngwenya, Mkhwanazi, Sithole and Mano say the global trade impasse is expected to weigh on exports, but they were positively surprised by the performance of agricultural exports as well as vehicles.
Nkonki and Matshego also noted the significant deterioration, “The notably smaller surplus reflects a steep contraction in exports while imports grew, albeit at a softer pace. Trade performance will likely remain lacklustre for the remainder of the year as the impact of US tariffs and subdued global demand continues to weigh on exports.
“However, the record gold price and gains from the recent uptick in platinum and coal prices will contain the downside. On the import front, demand will remain supported by favourable domestic economic conditions, including lower interest rates, subdued inflation, higher real incomes and a stable rand.”
