Statistics South Africa’s latest data show manufacturing output edging up 4.5% in June, an improvement on the 3.9% increase in May and the 3.2% increase in April.
However, while the increase is positive, likely to contribute to a modest boost in gross domestic product (GDP) growth and higher than the market’s forecast of slower growth of 3.1%, the underlying growth momentum remains relatively subdued.
During the month under review, chemicals, rubber and plastic products; wood and wood products, paper, publishing and printing products; and food and beverages positively contributed to the production boom, growing 15.4%, 4.4% and 2% respectively.
June’s seasonally adjusted manufacturing production increased 0.7%, following month-on-month changes of 1.3% in May and 0.6% in April, while quarterly seasonally adjusted manufacturing production increased 2% in the second quarter of 2016, compared with the first quarter.
Further, eight of the ten manufacturing divisions reported positive growth rates over this period, compared with only four in the first quarter.
“Taken together with the marginal lift of 0.1% in the quarterly seasonally adjusted electricity production and the 4.2% quarterly seasonally adjusted rise in mining production, this suggests that the industrial sector is likely to make a positive contribution to the second half of the year’s GDP, after detracting from GDP in the first half,” notes specialist banking and asset management group Investec.
Nedbank adds that the figures will help boost second-quarter GDP following the slump in the first quarter. “However, general economic conditions remain subdued, and the outlook is poor, with little growth overall still projected for this year,” says the bank.
Investec notes that manufacturing production increased by just 1.6% during the first half of the year after stagnating in 2014 and 2015 at 0.1% and –0.1% respectively.
“Production is likely being inhibited by tenuous global demand conditions, with global growth forecasts lowered post the Brexit referendum vote,” the firm comments.