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July manufacturing output decreases 4.1% y/y, 8% m/m

9th September 2021

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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Data released by Statistics South Africa (Stats SA) shows that South Africa’s manufacturing production decreased by 4.1% year-on-year and by 8% month-on-month in July.

This, the Steel and Engineering Federation of Southern Africa (Seifsa) says, largely reflects the negative impact of civil unrest seen in July across parts of Gauteng and KwaZulu-Natal.

Despite the statistical sample revisions applied this month, Nedbank Corporate and Investment Banking (CIB) on September 9 said the adverse events of July "clearly hurt the productive capacity of the manufacturing sector".

It added that the effects thereof "will probably be felt for some months as businesses, from manufacturing plants to retail outlets, are rebuilt and restored".

Nedbank CIB said subdued domestic demand and unreliable and expensive utilities would add further strain to the rebound, and that much of the recovery would rely on global demand and the containment of the virus, both locally and abroad.  

The July figures followed month-on-month decreases of 1.3% in June and 2.4% in May.

Industry-wise, the largest negative contributions were made by petroleum, chemical products, rubber and plastics, which decreased by 23.2% and contributed -5.4 percentage points.

The second largest negative contributor was the food and beverage industry, which decreased by 2% and contributed -0.6 of a percentage point.

However, Seifsa says “some encouraging news” is that year-to-date, manufacturing production increased by 12.9%, with sales up by 24.8%.

The largest positive contributions were made by furniture and other manufacturing, which increased by 41.2% and contributed 0.9 of a percentage point.

Basic iron and steel, non-ferrous metal products, metal products and machinery was the second largest positive contributor, with a combined growth of 3.6% and contributing 0.7 of a percentage point.

Seasonally adjusted manufacturing production decreased by 5.5% for the three months ended July, compared with the previous three months. Seven of the ten manufacturing divisions reported negative growth rates over this period, Stats SA reports.

Total production across all 13 sub-categories increased by an average of 4.5% in July, down from a high of 27.6% in June, with total sales having increased by 12.1% in July, down from a high of 38.6% in June.

The metals and engineering (M&E) sector’s total manufacturing production sales were R66.7-billion in July, down from R81-billion in June.

“As one of the backbone sectors of the South African economy, the M&E sector remains a crucial supplier of inputs into major sectors such as construction, mining and other manufacturing sub-industries and is, thus, an integral part of economic and industrial development in South Africa,” Seifsa chief economist Chifipa Mhango comments.

With this in mind, he adds that, while it’ is clear that the South African government’s focus is on economic policy and its recovery plan, “there is an urgent need to also address the socioeconomic challenges facing our country, as there can be no real growth in an unstable socioeconomic environment”.

FNB economist Koketso Mano, meanwhile, said that while the manufacturing Purchasing Managers Index (PMI) showed "a solid recovery in manufacturing activity in August", the impact of the unrest in July, the global shortage of raw materials (and semiconductors) and higher input costs could delay the recovery in manufacturing activity. 

Mano added that persistent load-shedding also poses a risk to domestic output.

"The projected fourth wave of Covid-19 infections before year-end could also disrupt overall economic activity. Meanwhile, the base effects do not look favourable, particularly between September and November."

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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