Seifsa economist Marique Kruger
Photo by: Creamer Media
Manufacturing production decreased by 1.1% year-on-year in July, Statistics South Africa (Stats SA) reports.
The largest negative contribution of -1.8 percentage points was made by the petroleum, chemical products, rubber and plastic products sector, which recorded an 8% contraction in output.
The basic iron and steel, nonferrous metal products, metal products and machinery sector, which recorded a 4.4% contraction in output, contributed -0.8 of a percentage point to the overall decrease.
Additionally, the wood and wood products, paper, publishing and printing sector, with a 5.1% contraction in output, contributed -0.6 of a percentage point.
Positive contributions were made by food and beverages, with a 7% increase in output and 1.9 percentage point contribution, as well as motor vehicles, parts and accessories and other transport equipment, with a 7.6% increase in output, contributing 0.6 of a percentage point.
On the upside, seasonally adjusted manufacturing production increased by 0.4% month-on-month in July. This followed month-on-month changes of -1.9% in June and -2.3% in May.
The Steel and Engineering Industries Federation of Southern Africa (Seifsa) welcomed the increase in broader manufacturing sector production.
Nonetheless, Seifsa economist Marique Kruger said the data was trending in negative territory and that this was worrisome.
She noted that concerns remained regarding various constraints, including exchange rate volatility and increasing intermediate input- and operational costs.
“These variables definitely constrained the value-add of manufacturing to the gross domestic product in the second quarter of the year, and have the ability to further hinder manufacturing’s contribution in the third quarter of the year.”
Kruger added that the generally weak exchange rate would boost manufacturing export competitiveness in the medium term, which would be to the benefit of businesses.
“It is imperative for businesses to stay resilient as the sector collectively seeks ways of reigniting long-term domestic growth,” she concluded.