March manufacturing output better than expected

9th May 2019

By: Mariaan Webb

Creamer Media Senior Deputy Editor Online

     

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South Africa’s manufacturing output is continuing on a positive trend, with March output increasing by 1.2% year-on-year, beating market expectations of a contraction of 0.2%.

The year-on-year gain follows on output growth of 0.5% in February and 0.8% in January.

On a month-on-month basis, production increased by 0.8%, Statistics South Africa reported on Thursday.

The market had expected a month-on-month contraction of 1.1%, Nedbank Group Economic Unit stated.

The largest positive contributions were made by energy-intensive industries, including petroleum, chemicals, rubber and plastics, as well as basic iron and steel, nonferrous metals, metal products and machines, which Nedbank said was surprising, given the extensive load-shedding experienced during the month.

South Africa in March experienced load-shedding at a scale and intensity last seen in the 2008 electricity crisis. The economy was subjected to about two days of Stage 2 and seven days of Stage 4 load shedding.

“While Eskom provides heavy-energy users in both mining and manufacturing with advance notice of upcoming power outages and allow firms to continue to operate on reduced electricity consumption ranging between cuts of 15% to 20%, it is still very surprising that mining and manufacturing output increased over the month given that more than a week’s production should have been hurt by extended power cuts,” the bank noted.

It stated that should Eskom manage to keep the lights on, or to at least limit future load-shedding to Stage 1, manufacturing output should improve further off a low base over next three quarters.

“The pace of recovery will, however, be contained by softer global and domestic demand, stagnant commodity prices and a relatively steady rand.”

Economist Marique Kruger, of the Steel and Engineering Industries Federation of Southern Africa, also commented that the improvement in March was encouraging, given the decline in business confidence and volatility in input costs.

She said that metals and engineering (M&E) industries were under duress, but that there was an expectation that the M&E cluster and broader manufacturing would remain resilient, pending a clear policy direction and certainty following this week’s general election.

Manufacturing output shrunk by a seasonally adjusted 2.4% quarter-on-quarter in the first three months of the year.

Edited by Creamer Media Reporter

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