Manufacturing output 3.4% lower year-on-year in January

11th March 2021

By: Marleny Arnoldi

Deputy Editor Online

     

Font size: - +

Manufacturing production decreased by 3.4% year-on-year in January.

Nedbank says the contraction was worse than the Reuters forecast of a 1.2% decline.

The largest negative contributors were petroleum, chemical products, rubber and plastic products, with a contraction of 13.9% and contributing -3.4 percentage points; food and beverages declining by 4.9% and contributing -1.5 percentage points; and furniture and ‘other’ manufacturing contracting by 12.1% and contributing -0.4 of a percentage point.

However, the motor vehicles, parts and accessories and other transport equipment division was a significant positive contributor, recording an increase of 28.1% and contributing 1.8 percentage points.

Statistics South Africa further reports that seasonally adjusted manufacturing production increased by 0.5% in January compared with December 2020. This followed month-on-month changes of 0.6% in December 2020 and -1.1% in November 2020.

Seasonally adjusted manufacturing production increased by 2.2% in the three months ended January compared with the previous three months. Eight of the ten manufacturing divisions reported positive growth rates over this period.

The largest positive contributions were made by motor vehicles, parts and accessories and other transport equipment, growing 17.4% and contributing 1.3 percentage points; basic iron and steel, nonferrous metal products, metal products and machinery, growing 5.5% and contributing one percentage point; and wood and wood products, paper, publishing and printing, increasing by 4.7% and contributing 0.5 of a percentage point.

The petroleum, chemical products, rubber and plastic products division, with a decline of 5% and contributing -1.1 percentage points, was, however, a significant negative contributor.

Looking ahead, apart from base-effects, much of the rebound will stem from increased demand from South Africa's major trading partners, mainly Europe and Asia.

Nedbank says a gradual uptick in the domestic environment will offer some support, although the resumption of load-shedding and underlying structural constraints will continue to pose downside risks to the sector’s recovery.

INFRASTRUCTURE

The Steel and Engineering Industries Federation of Southern Africa, meanwhile, said it was "very concerning" that manufacturing production was declining at a time when increased industrial activity was needed to revive the ailing economy.

Chief economist Chifipa Mhango said the decline, once again, highlighted the negative impact of Covid-19-induced lockdown regulations on the manufacturing industry and the economy in general, and that this situation needed to be reversed urgently.

Further, he pointed out that total sales across the manufacturing sector’s 13 subindustries had increased by 10.6% to reach R68.3-billion. He said this performance would need to be sustained through the speedy implementation of the government’s infrastructure plans if the sector and the economy as a whole were to recover.

Mhango stressed that, with the economy having contracted by 7% in 2020, it was imperative that the government intensify its efforts to revive the ailing economy and focus on the implementation of its recovery plans.

He said that while the government’s policies were attractive on paper, more needed to be done to speed up the implementation of critical interventions such as the Steel Master Plan in order to benefit both the upstream and downstream of the metals and engineering sector.

Mhango said the current state of the metals and engineering sector remained dire, with declining levels of employment and investment, as well as a weak trading position with the rest of the world.

“Fixed investment is key to reviving the sector. To grow the country’s industrial base, the fixed investment share of gross domestic product (GDP) needs to move to levels above 40%, from the current level below 20%,” he noted.

Further, while the government’s commitment to spend R791.2-billion in the next three years on various infrastructure projects was commendable, the slow rate of implementation and the mismanagement of funds had derailed progress towards achieving a higher ratio of fixed investment to GDP, he stated.

 

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

Comments

The content you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION