Ethel Hazelhurst
THE FORTUNES of South Africa’s embattled manufacturers rebounded in the fourth quarter. Data from Statistics SA, released yesterday, showed the sector grew 4.2 percent after two-quarters of contraction. Stats SA noted “strong growth” in the production of metal, wood and paper products and also in food, beverages and tobacco.
Manufacturing’s contribution to overall economic activity, together with growth of 5.2 percent in the trade sector, boosted overall growth to 3.2 percent in the last three months of the year. The outcome is a little ahead of the consensus expectation of 3.1 percent.
The figure is an improvement on the growth of 1 percent and 1.7 percent in the second and third quarters, but well below the 4.6 percent in the first quarter. The percentages reflect quarterly changes, adjusted for inflation and seasonal factors, and multiplied by four to show an annualised trend.
While still in barely positive territory – 0.7 percent – mining improved from a negative 17.8 percent in the third quarter.
Colen Garrow, the economist at Brait, attributed the improvement in manufacturing and mining to the rand, “which started losing its grip against the US dollar in September”.
The currency weakened from about R7 to the dollar at the end of August to a worst level of R8.6 in November. The depreciation made local goods cheaper on offshore markets.
Garrow said: “Although the local unit has strengthened somewhat recently, it never fully recovered to levels seen before last September. Exporters aren’t complaining.”
The rand was bid at R7.53 at 5pm yesterday.
Despite the improvement in two crucial sectors of the economy, the outlook is bleak and Finance Minister Pravin Gordhan said in last week’s Budget that gross domestic product would grow only 2.7 percent this year, from 3.1 percent last year, citing slow global growth.
Nedbank noted the fourth-quarter performance was off the low mid-year base and was not optimistic about the future. “While consumer spending will continue to support the broader services industries, weak demand from Europe is likely to contain exports and production in the agriculture, mining and manufacturing sectors.
“Activity in the finance and real estate industries will remain subdued, improving only marginally as the year progresses. Conditions in the construction industry will probably remain difficult and weak.”
Henry Flint at Thebe Stockbroking commented on the global outlook. “While there are tentative signs that the US economic recovery is gaining traction with growth expected at 1.8 percent and 2.2 percent this year and next, from 1.8 percent last year, the growth outlook for Europe and other significant economies is less rosy.
“According to the latest forecasts from the International Monetary Fund, the European economy is expected to contract by 0.5 percent this year, while growth in China is expected to slow to 8.2 percent from 9.2 percent and 10.4 percent in the two previous years.”
Standard Bank economist Sibusiso Gumbi said: “Tame growth prospects will make the government’s undertaking of creating 5 million jobs by 2020 an increasingly challenging one.”
Fourth-quarter employment figures are not out yet. In the third quarter 179 000 jobs were created and between the third quarters of 2010 and last year 365 000 jobs were added.