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Manufacturing sector’s recovery slows says Stats SA

Manufacturing sector’s recovery slows says Stats SA

The recovery in manufacturing production slowed in August, with factory output falling by 10.8% year-on-year from a revised 10.2% (previously -10.6%) contraction in July.

This is worse than Nedbank Group Economic Unit’s forecast of an 8.7% decline.

While all industries having recorded declines, the biggest drag came from the heaviest weighted industries, namely motor vehicles, parts and accessories and other transport equipment; basic iron and steel, nonferrous metals, metal products and machinery; as well as food and beverages; wood, paper, publishing and printing; petroleum, chemical products, rubber and plastic products.

These categories, together, subtracted 9.3 percentage points from the headline figure, with the largest contributor being that of the motor vehicles, parts and accessories and other transport equipment category with a -2.7 percentage point contribution.

The category declined by 30.6% overall.

On a seasonally adjusted month-on-month basis, production increased by 3.6% in August from 5.9% in the previous month, and 21.3% in June.

Seasonally adjusted manufacturing production increased by 20.7% in the three months ended August, compared with the previous three months, and all ten manufacturing divisions reported positive growth rates over this period, Statistics South Africa reported on October 12.

The largest contributions were made by the motor vehicles, parts and accessories and other transport equipment categories, which declined by 61.3% and contributed -2.8 percentage points.

Nedbank said in a separate statement that these figures “largely captured the rebound in domestic and global demand from the strict lockdown over the reference period”, adding that, so far this year, total output has declined by 15.9%.

Although global Purchasing Manager Indices (PMIs) mostly improved in September, the second wave of Covid-19 in Europe specifically poses some downside risks on the pace of recovery, Nedbank lamented.

It added that the recent Absa PMIs “provide some comfort” that the rebound in activity will continue, supported by the return of some normality in operations, but warned that “the upside will be challenged by unreliable power supply and a rather volatile rand exchange rate”.

Further, the latest production data for the manufacturing sector reflects “the resilience of the metals and engineering (M&E) cluster of sub-indices on a month-on-month basis,” said Steel and Engineering Industries Federation of Southern Africa chief economist Dr Michael Ade.

However, in a separate statement he said that the figures painted a worrisome yearly trend as the recession deepened amid the Covid-19 pandemic.

“Although the seasonally-adjusted monthly manufacturing output data had surprisingly continued to trend in positive territory from May, underpinned by improving business sentiment, the presence of headwinds from the months of the Covid-19-induced economic lockdown, the fear of contagion, a generally weak exchange rate and a stubbornly stagnant economy had led to poor year-on-year data,” he lamented.

Nevertheless, Ade still believes that the official monthly output statistics released “are still better than those of April, May and June”, and that it provides a light at the end of the tunnel for beleaguered businesses during these tough economic times characterised by unease and uncertainty.

Source: https://www.engineeringnews.co.za
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