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Recovery in SA manufacturing continues in November

10th January 2013

By: Idéle Esterhuizen

  

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The recovery in South Africa’s manufacturing production continued in November, with output up 3.4%, compared with the corresponding month in 2011, Statistics South Africa (Stats SA) revealed on Thursday.

The Stats SA data suggested that the year-on-year increase, which was up from the 2.7% increase recorded in October and exceeded market expectations of 2.2%, could be attributed to relatively higher production in several of the ten manufacturing divisions.

These included the petroleum, chemical products, rubber and plastic products division where an 11.4% increase in production was recorded; the motor vehicles, parts and accessories and other transport equipment division, which saw 6.7% growth in production; and a 7% increase in output in the furniture and other manufacturing division.

Other divisions contributing to the country’s increased manufacturing production were the radio, television and communication apparatus and professional equipment division, achieving a 13.8% increase; the textiles, clothing, leather and footwear division, which recorded a 1.5% increase; as well as the basic iron and steel, nonferrous metal products, metal products and machinery division where production rose by 0.6%.

The wood and wood products, paper, publishing and printing division also contributed with a 0.6% increase in production during the month.

Similarly, seasonally adjusted manufacturing production in the three months ended November increased by 0.8%, compared with the previous three months, as six manufacturing divisions reported positive growth rates over this period.

The increase was largely driven by the radio, television and communication apparatus and professional equipment division with its 6.8% growth in production; the petroleum, chemical products, rubber and plastic products division, which saw a 5.9% increase in production; and the wood and wood products, paper, publishing and printing division where a 5.4% improvement in production was achieved.

Joining the top contributors was the basic iron and steel, nonferrous metal products, metal products and machinery division, which recorded a 2.5% increase in production.

SALES

Meanwhile, seasonally adjusted sales of manufactured products increased by 2% or R7.5-billion in the three months ended November, up from the previous three months, boosted by positive growth rates in seven of the ten manufacturing divisions.

The petroleum, chemical products, rubber and plastic products division, where sales increased by 8.3% or R7.3-billion; the food and beverages division, which recorded a 3.2% or R2.48-billion improvement; and the wood and wood products, paper, publishing and printing sector, where sales improved by 6% or R1.78-billion, were the main contributors to the sales increase.

However, the increases were partially counteracted by the motor vehicles, parts and accessories and other transport equipment division, which saw a 7.7% or R3.72-million decrease in sales.

In a note to clients, banking group Nedbank’s economic unit stated that despite the improvement in manufacturing output and sales towards the end of 2012, the trading environment would remain challenging in 2013.

“A weak eurozone will continue to hurt the large export-orientated industries. The long-term pressure on manufacturers providing goods to the local consumer markets will also persist as consumer spending remains moderate and highly price-sensitive, favouring competitively priced imports,” the firm said.

On the upside, the recent recovery in infrastructure spending by the public sector was anticipated to support the industries producing capital goods and other inputs for local projects. However, this would be contained by slower capital expenditure by the private sector in response to the struggling local and international economic environment.

Nedbank expected the moderate recovery in manufacturing production to continue this year.

“Recent economic indicators suggest that the economy probably improved slightly from the strike-inflicted lows of the third quarter. However, the pace of the recovery remains slow and uneven, with production under pressure, while domestic spending is still propping up the economy… Much the same pace and composition is expected in 2013,” the banker said.

It added that the South African Reserve Bank's (SARB’s) Monetary Policy Committee would probably opt to keep interest rates at current low levels for as long as possible.

Meanwhile, Absa Capital macro economist Ilke van Zyl said South Africa’s manufacturing production fared quite well, despite challenges that included strike action.

She added that factors underpinning her improved outlook for local manufacturing included a weaker rand.

“While a weaker rand usually feeds into higher domestic inflation and, in turn, leads to higher export prices, we think that, given the global struggle for market share, manufacturers might be hesitant to pass through such a local increase in prices to global consumers. While this would hurt income statements in the process, growth in real numbers should stay supported,” Van Zyl commented.

She also anticipated the country’s benchmark interest rate to remain unchanged until late 2014, as the SARB attempted to balance rising inflationary risks with lower growth.

“Manufacturing production’s healthy performance during November 2012 supports our view that further monetary loosening is not necessary at this time,” Van Zyl concluded.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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