Manufacturing production decreased by 2% year-on-year in January.
International specialist banking and asset management group Investec commented that this was the eighth consecutive contraction in manufacturing activity and was reflective of the country’s “delicate” economic situation, underpinned by weak demand and exacerbated by current global challenges.
The largest negative contributions were made by wood and wood products, paper, publishing and printing (-6.7% and contributing -0.7 of a percentage point); motor vehicles, parts and accessories and other transport equipment (-5.6% and contributing -0.4 of a percentage point); textiles, clothing, leather and footwear (-10.3% and contributing -0.2 of a percentage point); basic iron and steel, nonferrous metal products, metal products and machinery (-1.3% and contributing -0.2 of a percentage point) and petroleum, chemical products, rubber and plastic products (-0.7% and contributing -0.2 of a percentage point).
Investec said that, worryingly, advance indications provided by the Bureau for Economic Research’s (BER’s) February Purchasing Managers Index (PMI) reading remain unsupportive of any near-term pickup in manufacturing activity.
Specifically, it mentioned that the manufacturing PMI gauge had fallen to 44.3 in February, from 45.2 in January and 47.1 in December, signalling a further deterioration in operating conditions.
“Domestically, heightened electricity supply disruptions continue to weigh on production, while household balance sheets, aggravated by elevated unemployment rates, impede consumer demand.
“The potential impact of the coronavirus outbreak on global growth and trade persists,” said the company.
Financial services group Nedbank Economic Group Unit, meanwhile, stated that prospects for manufacturing production remained subdued owing to ongoing load-shedding and weak consumer demand.
On the global front, the effect of the coronavirus pandemic on global trade and growth, coupled with weak commodity prices, would place additional strain on the sector.
“Weak prospects for manufacturing, increased risk of a credit ratings downgrade and strained business and consumer confidence suggest that growth prospects for the first quarter remain quite bleak,” Nedbank said.
Banking company FNB also expects manufacturing production to remain subdued in the near term as a result of load-shedding and disruptions to various global supply chain networks owing to the spread of Covid-19.
“Additionally, the decline in the January Absa manufacturing PMI and weak domestic demand provide credence to our bleak outlook,” said FNB.
Meanwhile, seasonally adjusted manufacturing production increased by 2.5% month-on-month in January.
This followed month-on-month changes of -3% in December 2019 and -1.8% in November 2019.
The Steel and Engineering Industries Federation of Southern Africa welcomed this rebound, especially as it was the first increase recorded since September.
Moreover, it was noted as encouraging given the headwinds facing the sector.
Seasonally adjusted manufacturing production for the three months ended January 31, however, decreased by 1.8% compared with the previous three months.
Eight of the ten manufacturing divisions reported negative growth rates over this period.
The largest negative contributions were made by motor vehicles, parts and accessories and other transport equipment (-12.5% and contributing -1.0 percentage point); and wood and wood products, paper, publishing and printing (-4.2% and contributing -0.4 of a percentage point).
The largest positive contribution was made by the petroleum, chemical products, rubber and plastic products sector (1.4% and contributing 0.3 of a percentage point).