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Manufacturing output slows for 16th consecutive month

10th November 2020

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Manufacturing data for the month September picked up slightly from the previous month, but output is still below levels recorded last year, according to Stats SA.

Manufacturing data from Stats SA showed that production declined 2.6% year-on-year in September 2020. This is the industry's sixteenth consecutive month of year-on-year declines.

Seven of ten divisions recorded a slowdown in activity. The largest negative contributor to overall manufacturing growth was basic iron and steel and metal products and machinery division, having declined 7.5% year-on-year. Motor vehicles, parts and accessories and other transport equipment was the second-largest negative contributor, having declined -12.7%.

The clothing and textiles division recorded its first month of positive growth since November 2018, increasing output by 1.9% year-on-year.

The largest contributor to growth was food and beverages, which increased 4.2% year on year.

Month-on-month production increased by 3.2% in September. By comparison, on a month-on-month basis output levels improved 3.3% in August and by 5.6% in July.

In a note ahead of the data release, FNB economists warned that the sector may still face headwinds – such as reliable and affordable electricity, weak domestic demand, and global competitiveness. "However, should the president’s recent announcement in the Economic Reconstruction and Recovery Plan of increased localisation and an infrastructure drive materialise, the long-term outlook for the sector will improve," the note read.

Investec economist Lara Hodes noted that September's performance surprised, with the consensus expectations of -7.7%. Hodes said the recovery to pre-pandemic levels of output will be protracted, due to insufficient demand as consumers face financial uncertainty.

Edited by News24Wire

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