While mining production was still steeply down on a year-on-year basis, month-on-month output growth improved for a second month in April. Another monthly uptick in May bodes well for the sector’s contribution to GDP growth, says economic research institute Bureau for Economic Research (BER) chief economist Lisette IJssel de Schepper.

“The trade and mining production figures for May will help colour in the picture for second-quarter GDP growth.”

Retail sales started surprisingly strong in the second quarter, possibly supported by renewed access to retirement savings under the two-pot system. A slight loss of momentum is expected in the May data, as that effect begins to fade, she adds.

Further, according to Statistics South Africa, factory output grew by 0.5% year-on-year in May, following a downwardly revised contraction of 6.4% in April. This performance beat Reuters analysts' expectations of a further 1.5% contraction in May, says BER economist Nkosiphindile Shange.

This marks the first positive year-on-year growth in manufacturing production so far in 2025. Five of the subsectors contracted, while the other five expanded. The metal subsector grew by 4.3% and contributed 0.9% percentage points. The motor vehicles and transport equipment subsector contracted by 6.7%, shaving 0.6% percentage points from growth.

On a monthly basis, factory output rose by 2% in May, building on downward revised growth of 1.7% in April.

The second consecutive increase bodes well for the sector’s contribution to GDP in the second quarter of the year, he notes.

Further, in commodity markets, copper futures recorded the biggest intraday gain in decades, hitting a record high, after the US said it would place a 50% levy on copper imports. The US currently imports about 60% of its copper needs, De Schepper says.

However, there is no clarity on what kind of copper will be targeted with the tariff, such as raw or refined, she adds.

Meanwhile, the US announced 30% tariffs on South African goods, with the implementation date was set for August 1. A 10% universal tariff now looks to be turning into a best case scenario, she says.

“While we expect the impact on the entire South African economy is relatively small, some motor manufacturing and pockets of agricultural produce will be hit hard,“ she notes.

The US has said it is open to further negotiations, but has rebuffed President Cyril Ramaphosa's assertion that the calculation is based on incorrect data.

“Arguing about the accuracy of data is unlikely to sway his position. Hopefully, by highlighting what South Africa can offer the US and being pragmatic, there is some scope to wiggle down the tariff, as some other countries have successfully done,” she says.

US President Donald Trump has also warned that any country adopting the anti-American policies of political bloc BRICS Plus, which includes Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia and the United Arab Emirates, would face an additional 10% tariff, although there was no mention of this in the letter South Africa received, De Schepper says.

The rand weakened sharply after the announcement of the 30% tariffs, while dollar-denominated government bonds declined, but both recovered later.

Additionally, global financial markets did not move much as more announcements were made, possibly expecting another TACO, or Trump Always Chickens Out, despite repeated assurances from Trump that no further extensions would be granted.

If the tariffs are harsher than expected, announcements on trade with big trading partners like the EU and India man may cause jitters, she notes.

Following the US Liberation Day tariffs announcements in April, the EU threatened to respond with targeted retaliation should it feel necessary. So far, only China has really retaliated, and secured a relatively favourable trade deal with the US, she highlights.

Trump also threatened to impose a 200% levy on pharmaceuticals.

The weekend’s announcement by the Organisation of the Petroleum Exporting Countries Plus to increase crude production by about half a million barrels per day from August did not significantly move the oil price. Markets seem to want to wait to see the actual production ramp-up relative to the announced increase.

Additionally, even with the steady increase in recent months, production remains below pre-pandemic levels.

Simultaneously, estimates for near-term US crude production are being scaled down, although still set to reach record highs, which, along with Red Sea attacks, contributes to upward pressure on fuel prices.

Locally, Finance Minister Enoch Godongwana, during the National Treasury’s budget vote, commented on the potential inflation target change, stating that the responsibility of changing the target lies with the Finance Minister.

While low inflation is good for the economy, he argued that more technical and political engagements were necessary, and the decision should not be made in haste.

“While acknowledging the near-term costs, we maintain that the time for a change in the inflation target framework has arrived,” De Schepper says.