Downward trend in output continues
JOHANNESBURG - Manufacturing output production decreased for the ninth consecutive month in February due to weak demand and aggravated by the elevated unemployment rate.
Statistics South Africa (StatsSA) yesterday said that manufacturing production contracted by 2.1 percent year on year, following declines of 1.8 percent and 6.3 percent in January and December, respectively.
Output had declined by 2.3 percent on a month-to-month basis compared to January.
StatsSA said the largest contributors to the decline were in basic iron and metal products, wood, paper and publishing products, clothing and footwear, and textile divisions.
The food and beverages division, however, grew 2.2 percent year on year, contributing 0.6 percentage points to overall annual manufacturing production.
FNB economist Geoff Nölting said the resilience in this sub-sector was evident in the historical data.
Nölting said the food and beverages division has only contracted in three months on an annual basis, since 2017.
“The outlook for the manufacturing sector remains bleak, particularly in the clothing, footwear and textiles, and motor vehicle parts and accessories’ subsectors,” Nölting said.
“This is due to disruptions in global supply chains and strain in the domestic labour market, as employment and income growth are expected to come under severe pressure amid stringent lockdown measures.”
On a seasonally adjusted basis, SatsSA said manufacturing contracted 2.2 percent in the three months to end February, compared with the previous three months from September to November.
The Bureau for Economic Research’s survey for the first quarter of 2020 showed that manufacturing business confidence fell back at close to all-time low levels, plummeting by 7 index points to 17 points.
A net majority of survey respondents were expecting business conditions to deteriorate in 12 months’ time.
Investec economist Lara Hodes said the February data reflected South Africa’s delicate economic situation as electricity supply disruptions continued to weigh on production.
“February’s reading does not, however, reflect the devastating global impact of the lockdown-containment measures enforced to limit the spread of the Covid-19 pandemic and flatten the curve, which has devastated the South African economy,” Hodes said.
“Indeed, the economy is projected to contract by more than 10percent year-on-year this year,” she said.