Manufacturing sector struggling to recover to pre-pandemic output levels

12th October 2021

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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Manufacturing production increased by 1.8% year-on-year in August, Statistics South Africa (Stats SA) reports.

The largest positive contributions were made by food and beverages (9.7% and contributing 2.3 percentage points); motor vehicles, parts and accessories and other transport equipment (17.7% and contributing 1.4 percentage points); basic iron and steel, nonferrous metal products, metal products and machinery (7.6% and contributing 1.4 percentage points); wood and wood products, paper, publishing and printing (12.5% and contributing 1.2 percentage points); and furniture and ‘other’ manufacturing (19.8% and contributing 0.8 of a percentage point).

The largest negative contribution was made by the petroleum, chemical products, rubber and plastic products division (-21.8% and contributing -5.6 percentage points).

Seasonally adjusted manufacturing production increased by 7.6% in August compared with July.

This followed month-on-month changes of -8.4% in July and -0.5% in June.

Seasonally adjusted manufacturing production decreased by 6.3% in the three months ended August compared with the previous three months.

Nine of the ten manufacturing divisions reported negative growth rates over this period.

The largest negative contributions were made by food and beverages (-7.7% and contributing -1.9 percentage points); motor vehicles, parts and accessories and other transport equipment (-15.9% and contributing -1.7 percentage points); and petroleum, chemical products, rubber and plastic products (-7.4% and contributing -1.5 percentage points).

Commenting on these findings, Don Consultancy Group chief economist Chifi Mhango says he is encouraged by the positive growth rate, which was achieved despite the low level of investment and job shedding being experienced in the sector overall.

He emphasises that manufacturing remains a key sector for the economy and requires government support to improve on these results and ensure growth in employment.

Also commenting, Nedbank Group Economic Unit says that manufacturing production remains below pre-pandemic levels, with output 10.1% and 10.4% lower than the August 2019 levels and the 2017 to 2019 average, respectively.

It notes that, despite the application of new weights by Stats SA from this month, it is evident that a recovery is under way, albeit gradual and uneven.

“The food and beverage plants have been benefiting largely from the looser lockdown restrictions. The movement of people supported by vaccinations has been providing much-needed support to the sub-sectors recovery.

"Unfortunately, most other sectors will probably lag as balance sheets and profitability are restored and, for some, rebuilding operations get under way. Subdued domestic demand and unreliable and expensive utilities will add further strain to the rebound. Much of the recovery will rely on global demand and the containment of the virus, both locally and abroad,” Nedbank notes.

In terms of outlook, FNB senior economist Thanda Sithole says the impact of the July unrest, the global shortage of raw materials (and semiconductors) and higher input costs imply that this sector faces a protracted recovery to pre-pandemic levels.

“Persistent load-shedding also poses a risk to domestic output as most manufacturers rely on power supply for production. 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,” she says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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