Data published by Statistics South Africa on Tuesday showed a 5.9% year-on-year decrease in manufacturing production for December.

The largest negative contributors to manufacturing production in the month under review were motor vehicles, parts and accessories at -24.9%; petroleum, chemical products, rubber and plastic products at -5.9%; basic iron and steel, nonferrous metal products, metal products and machinery at -3.3%; and food and beverages at -1.5%.

For the full year, manufacturing production decreased by 0.9% compared with 2018, with the largest negative contributors being wood and wood products, paper and printing at -4.8%; basic iron and steel at -1.8%; and petroleum products at -1.5%.

For the year, the food and beverage sector was the only positive contributor, with 3.4%.

Financial services provider Nedbank commented in a statement on Tuesday that the negative contributors to the yearly manufacturing production figure were from the export-oriented industries and that improvements in manufacturing production remained vulnerable owing to the likelihood of continued load-shedding, uncertain global growth, weak commodity prices and constrained domestic demand.

“Although purchasing managers indexes (PMIs), published last week, of developed and industrialised economies showed signs of recovery, manufacturing activity in developing economies remain subdued.

“A similar trend can be expected locally, highlighted by the latest ABSA and Standard Bank PMIs. Both indicators remain below the key 50-mark, suggesting poor short-term manufacturing prospects,” the bank noted.

Steel and Engineering Industries Federation of Southern Africa economist Marique Kruger said the decreased manufacturing production figures for December did not augur well for companies in both the metals and engineering (M&E) cluster of industries and the broader manufacturing sector.

She pointed out that the data dampened the mood ahead of the much-anticipated State of the Nation Address by President Cyril Ramaphosa on Thursday evening.

Kruger said companies in the M&E sector were increasingly facing headwinds underpinned by stagnant domestic demand, unpredictable and costly energy supply, high petrol prices and high logistics costs.

She added that the difficult commercial and operational environment, alongside weak job numbers and poor consumer spending on intermediate goods, highlighted the need for local businesses to innovate continuously and seek ways of producing towards better margins.