Stats SA’s director of industry statistics, Nicolai Claassen, said manufacturers specialising in the production of food and beverages registered an increase of 9.7 percent year-on-year. Photo: File
Manufacturing output in South Africa could turn the corner for the better in the second half of the year if the energy crisis does not disturb momentum following the rebound in July.
However, if load shedding intensifies during the summer months as Eskom has indicated, manufacturing output could continue slowing down and drag the overall economic growth.
Data from Statistics South Africa (Stats SA) yesterday showed that manufacturing output increased by 3.7 percent year-on-year in July after three consecutive months of downturn.
Manufacturing was the biggest drag on gross domestic product (GDP) in the second quarter, falling by 5.9 percent after floods damaged factories and plants, and disrupted logistics and supply chains in KwaZulu-Natal while rotational power cuts intensified.
However, this July manufacturing print was still slower than the market’s forecast of between 4 percent and 4.5 percent.
Stats SA said six of the 10 manufacturing divisions recorded a rise in activity, with manufacturers in food and beverages and the automotive division making the largest positive contributions to growth.
Stats SA’s director of industry statistics, Nicolai Claassen, said manufacturers specialising in the production of food and beverages registered an increase of 9.7 percent year-on-year.
Claassen said the automotive division was also a major positive contributor to overall manufacturing production growth, recording an increase of 12.1 percent.
“The economy also saw increased output from manufacturers in communication equipment,” Claassen said.
“Textiles and clothing, and electrical machinery, the furniture and other manufacturing division, which includes furniture, tobacco recycling and other smaller manufacturers, also registered stronger year-on-year results in July.
“On the downside, four manufacturing divisions recorded a year-on-year decrease in production, with the petroleum chemical rubber and plastic products division the largest negative contributor.”
Meanwhile, output in the petroleum, chemical products, rubber and plastic products category turned the corner, contracting by 1.1 after two months of fairly robust growth.
Output in the basic iron and steel, non-ferrous metal products, metal products and machinery also remained weak, falling for the third consecutive month in July due to lingering effects of load shedding, moderating global demand and softening commodity prices.
FNB senior economist Thanda Sithole, however, said that manufacturing output would likely rebound from the weakness that was induced by load shedding and flooding in the second quarter.
“We expect manufacturing output growth to average around 1 percent this year, reflecting a material deterioration from the 6.5 percent cyclical rebound in 2021,” Sithole said.
“Although external and domestic demand is expected to moderate next year, easing production costs and supply chain pressures could support manufacturing activity.”
On a month-on-month basis, production fell by 0.2 percent in July following an upwardly revised month-on-month decline of 2 percent in June.
Nedbank economist Johannes Khosa said manufacturing production rebounded off a low base in July, but the sector was still facing headwinds as it remained below the pre-Covid levels.
Khosa said subdued global demand, correction in some international commodity prices and recurring lockdown restrictions in China would contain the upside for some export-oriented industries.
“Locally, electricity shortages and higher input costs will continue to limit production capacity, while high cost of living and weak consumer confidence will hurt those industries that primarily serve the domestic market in the short term,” he said.
“As a result, manufacturing production is likely to be a drag on GDP for the remainder of the year.”
BUSINESS REPORT
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