The yearly rate of contraction in manufacturing production in South Africa eased to 2.1% in February from a downwardly revised 4.2% in January.

Financial institution Nedbank notes that this was much worse than both the bank’s and Reuters' consensus forecast of -0.4%, suggesting a much slower than initially anticipated recovery in the sector.

The main contributors to the decline were the export-oriented categories, petroleum, chemical products, rubber and plastic products’ (-8.4%), basic iron and steel, nonferrous metal products, metal products and machinery (-4.8%) and furniture and other manufacturing (-17%), which shaved off 3.3 percentage points from the headline figure.

Among the other major categories, motor vehicles, parts and accessories and other transport equipment (recording growth for four straight months) made a significant positive contribution, growing by 13.2% year-on-year, offsetting some of the overall reduction.

On a month-on-month seasonally adjusted basis, output declined by 1.2% in February from the preceding two months of growth.

Over the three months to February, output expanded by a much softer 0.3% compared with the previous three months.

Seven of the ten categories advanced, with the food and beverages and petroleum, chemical products, rubber and plastic products categories making the biggest negative contribution.

The recovery in manufacturing production continued in February, albeit at a much slower pace, which reflected slowdown in demand from the country’s major trading partners, particularly Europe, Nedbank indicated.

Looking ahead, apart from base-effects, it posited that much of the rebound in activity would stem from improving global demand.

A gradual uptick in the domestic environment will offer some support, although unreliable electricity supply and underlying structural constraints will continue to pose downside risks to the sector’s recovery, Nedbank said.