South Africa's economy looked poorer this past week after gross domestic product (GDP) contracted by 0.2% in the second quarter, mining production declined in July, manufacturing output recorded a modest recovery and business confidence remained subdued.
The RMB/BER Business Confidence Index (BCI) for the third quarter slipping by one point to 38, underscoring the persistent strain facing companies despite some easing in input-cost pressures.
The rand also weakened after recently trading below R16 to the United States (US) dollar - it was trading at $16.14 per dollar on Friday.
Anchor Capital said in its market report on Friday that in South Africa, the current account balance recorded a deficit in the second quarter of 22026, while mining production declined in July and manufacturing production advanced in July.
"In the US, the annual producer price index climbed more than expected in August, while initial jobless claims declined less than anticipated in the week ended 4 September 2026. Yields on benchmark bonds were higher on Thursday. The yield on the SA 10-year generic bond advanced to 8.97%, while that for the SA 20-year generic bond climbed to 9.40% last week," Anchor Capital stated.
On Friday, the US dollar traded at R16.15 against the rand, the euro traded marginally higher at R18.74, and the British pound traded at R21.82.
Geopolitical tensions send oil prices surging
Globally, conditions worsened as tensions between the US and Iran flared up again this week, specifically in the strategic Strait of Hormuz, the important shipping corridor for Brent crude around the world.
Brent crude prices breached the $100 mark during the week and traded at $106.09 per barrel (bl) on Friday.
Anchor Capital said on Friday that on Thursday, Brent rose 6.3% to settling at $107.63/bl, as escalating attacks on shipping fuelled concerns over further supply disruptions.
"The US Energy Information Administration (EIA) reported that US crude inventories fell by 0.39mn bls in the week ended 4 September 2026.
On Friday, gold declined 0.2% to trade at $4,308.20/oz, after declining 2.0% on Thursday to close at $4,315.25/oz, as robust US producer price inflation data and rising oil prices raised expectations of a Federal Reserve rate hike.
GDP contracts
The economy contracted after growing by 0.4% in the first quarter, with trade, manufacturing and mining among the main drags on growth in the same period.
South Africa’s gross domestic product (GDP) contracted by 0.2% in the second quarter of 2026, Stats SA reported on 8 September 2026.
The trade, catering and accommodation industry declined by 1.9%, subtracting 0.2 of a percentage point from overall growth. Activity decreased in wholesale trade, motor trade, and food and beverages.
Dr Lerato Ntuli, an economist at Anchor Capital, said that consumers will feel the impact of the country's fragile economy.
Ntuli said, "While household consumption increased by 0.4%, spending growth was concentrated in essentials such as food, healthcare, and basic leisure activities. At the same time, households reduced spending on transport, clothing, communication, and utilities."
"The labour market provides a more concerning signal. Mining output declined by 3% and employment in the sector fell sharply, while manufacturing contracted for a third consecutive quarter and also recorded job losses."
When both output and employment decline simultaneously, it points to genuine economic weakness rather than a temporary adjustment in labour market participation, said Ntuli.
She further said that the escalation of the Middle East conflict during the quarter added to these pressures.
"The resulting surge in global oil prices increased input and transportation costs across the economy, weighing on overall economic activity," Ntuli said. .
Business confidence remains weak
The one-point decline meant that 62% of businesses surveyed remain dissatisfied with prevailing business conditions.
It also left confidence below its long-term average of 40 and well off the 47 recorded in the first quarter, when sentiment was buoyed by improving economic conditions.
The survey, conducted between 13 and 24 August, suggested that the sharp deterioration in confidence seen in the second quarter has stabilised rather than been reversed.
“The latest result suggests the sharp eight-point decline in confidence recorded in the second quarter has neither deepened nor been reversed,” the RMB/BER Index said.
Mining slump deepens
South Africa’s mining production decline deepened in July, while manufacturing output recorded a modest recovery, according to the latest data from Stats SA.
Mining production fell by 7.5% year on year in July, worsening from a revised 4.3% decline in June and undershooting the Bloomberg consensus forecast of a 4.0% contraction, Investec economist Lara Hodes said.
Lower output of platinum-group metals (PGMs), coal and iron ore were the main contributors to the decline.
Hodes said that PGM production, which accounts for just over 27% of the mining basket, fell by 13.5% year on year, compared with an 8.4% decline in June. This subtracted 3.2 percentage points from the headline figure.
Hodes added that Iron ore production fell by 8.1%, while coal output declined by 7.5%. Together, the two commodities subtracted a further 3.3 percentage points.
Hodes said that diamond production, which accounts for 2.1% of the mining basket, fell by 48.2% in July and subtracted 0.9 percentage points from the overall result.
Hodes attributed the decline partly to competition from lab-grown diamonds and weaker demand in key markets.
Hodes noted that the mining sector is also facing elevated input costs.
The coming week will see important data releases that will impact our economy such as the Federal Reserve's FOMC interest rate decision, along with South Africa's inflation expectations, retail sales data and consumer confidence readings.
ashley.lechman@nationalmg.co.za