Manufacturing production increased by 5.8% year-on-year in July, compared with a revised 0.9% expansion in June, Statistics South Africa (Stats SA) reported on Tuesday.

The higher factory output, which Nedbank said was in line with expectations, came on the back of increased production in the petroleum, chemical products, rubber and plastic products; and the basic iron and steel, nonferrous metal products, metals products and machinery divisions, which each contributed 1.7 percentage points.

Food and beverages contributed 1.3 percentage points to the July manufacturing increase.

Nedbank noted that despite the increase in production in July, the outlook for the rest of the year remained relatively bleak. “Recession in Europe, a subdued US economy and slower growth in China and other major emerging markets will weigh on the sector, undermining production, inventories and capital expenditure by the major export-orientated industries,” it said in a report.

Meanwhile, seasonally adjusted manufacturing production for the three months ended July increased by 0.1% compared with the previous three months.

Five of the ten manufacturing divisions reported positive growth rates over this period. The largest contributions to the increase of 0.1% were made by the following divisions: motor vehicles, parts and accessories and other transport equipment (3.7% and contributing 0.4 of a percentage point); food and beverages (2.2% and contributing 0.4 of a percentage point); petroleum, chemical products, rubber and plastic products (1.3% and contributing 0.3 of a percentage point) and electrical machinery (9.7% and contributing 0.3 of a percentage point).

These increases were to a large extent counteracted by lower production recorded for the basic iron and steel, nonferrous metal products, metal products and machinery division (-6.4% and contributing -1.3 percentage points).

Seasonally adjusted sales of manufactured products decreased by 0.5%, which translated to a loss of R1-billion in the three months ended July, compared with the previous three months.

Four of the ten manufacturing divisions reported negative growth rates over this period. The divisions mainly responsible for the decrease in total manufacturing sales were petroleum, chemical products, rubber and plastic products (-3.5% or -R3.2-billion) and basic iron and steel, nonferrous metal products, metal products and machinery (-3.4% or -R2.8-billion).

“Given the complex nature of the constraints weighing on the global economy, conditions in the manufacturing sector are likely to deteriorate during the remainder of this year and into the next.

“Although the market is expecting another rate cut, we expect the manufacturing process control to adopt a wait-and-see approach, ready to act if global conditions worsen dramatically but otherwise content to keep rates unchanged for an extended period if global and local conditions stabilise,” Nedbank commented.
 

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