The manufacturing outlook for 2016 remains gloomy as manufacturing activity in November weakened more than the markets had expected, Nedbank’s Economic Unit said in response to Statistics South Africa’s (Stats SA’s) monthly manufacturing production and sales report, released on Tuesday.
Manufacturing production was forecast to continue its downward trend after declining 1% year-on-year in November 2015, owing to lower production in the basic iron and steel, nonferrous metal products, metal products and machinery division, contributing -7% and -1.3 percentage points respectively.
Seasonally adjusted manufacturing production decreased 1.2% in November 2015, compared with October 2015, following month-on-month changes of -1.7% and 2.3% in October and September 2015 respectively.
“The consensus market forecast was for a decline of 0.4% year-on-year,” Nedbank commented.
It was expected that weak global demand, excess global production capacity, depressed commodity prices, significant domestic infrastructure constraints, high cost structures, “muddled” economic policies and fading domestic demand would continue to drag output in the near future.
“The actual manufacturing production data underscores the Purchasing Manager’s Index (PMI) survey which, in November, set the manufacturing sector at its worst reading since the 2008/9 recession. The PMI gauge has registered contractionary readings throughout the second half of 2015,” Investec said in a comment to clients.
Investec believed a number of headwinds would continue to confront the manufacturing sector, with tepid growth in foreign demand limiting the potential expansion of local manufactured goods exports.