Manufacturing output in South Africa is expected to continue struggling as the impact of the Transnet strike and intense power cuts of up to Stage 6 continued to weigh on the sector, after activity fell to a five-month low in November.
Data from Statistics South Africa (Stats SA) yesterday showed that manufacturing production fell by 1.1% from a year earlier in November, less than expected compared with market forecasts of a 3.5% decline.
This downwards print in November followed a 1% increase in the preceding month of October, and was the first monthly decline in the country’s factory activity after four consecutive months of increases since July.
This was a turn for the worse for the manufacturing industry which was a significant positive contributor to the 1.6% growth in gross domestic product (GDP) in the third quarter, bolstered mainly by the automotive sector, food and beverages, and metal products.
However, the manufacturing industry was the sector with the least jobs created (1 000) when total employment in the formal non-agricultural sector increased by 10 000 in the third quarter. Stats SA’s director of industry statistics, Nicolai Claassen, said that output fell in almost all sub-activities in November.
Claassen said the largest negative contributions were made in food and beverages, wood and wood products, paper, publishing and printing, petroleum, chemical products, rubber and plastic products.
Conversely, Claassen said production rose solidly for motor vehicles, parts and accessories, and other transport equipment at 13.4% year on year.
“The largest positive contribution was made by the motor vehicles, parts and accessories and other transport equipment division,” Claassen said.
“On a monthly basis, seasonally adjusted manufacturing production increased by 2.0% in November compared with October. This followed month-on-month changes of 6.2% in October and 4.6% in September.”
This is in line with the results of November’s Absa Purchasing Managers Index (PMI) survey, which saw an improvement in export sales relative to October when external trade was constrained by the labour strike at Transnet, compelling Transnet Port Terminals to declare a force majeure.
According to the SA Association of Freight Forwarders (SAAFF), the 11-day strike caused South Africa to lose the opportunity to move R65.3 billion worth of goods, and the country is expected to recover from the impact of the strike only by 2023.
Investec economist Lara Hodes said Absa’s December’s PMI gauge also rose modestly from 52.6 to 53.1 points, with the purchasing price sub-index improving notably and reaching its lowest level since late 2019, which was positive for producers Hodes warned that manufacturing production was not out of the woods as the business activity sub-index worsened, which is indicative of weak underlying momentum in the sector.
“Persistent load shedding weighing heavily on the energy intensive manufacturing sector, remains a key concern and downside risk to economic activity,” Hodes said.
BUSINESS REPORT