Economy / 11 December 2019, 3:30pm / Siphelele Dludla
JOHANNESBURG – Manufacturing production eased 0.8 percent year-on-year in October as seven of the 10 divisions reported negative growth during the period.
Data from Statistics South Africa (StatsSA) on Monday showed that wood, paper, publishing and printing segment had the biggest drag in the overall manufacturing production with 6.1 percent contraction.
StatsSA said metal products, basic iron and steel also fell 2.2 percent, making the largest negative contributions to the print. StatsSA director of industry statistics, Nicholas Klassen, said: “South African manufacturing production shrank for the first month in a row in October, falling by 0.8 percent year-on-year.”
“Wood, paper, and publishing, and basic iron and steel, and machinery, were the biggest drag on overall production.” He said textiles and clothing production experienced its eleventh consecutive month of year-on-year decline, falling by 9.6 percent, while footwear and leather products were two notable drags on production.
The decline in the October output followed a month-on-month contraction of 2.4 and 1.2 percent in September and August, respectively.
It means that the economy is likely to continue on its downward spiral into the fourth quarter after it shrank 0.6 percent in the third quarter, following a rise of 3.2 percent in the second quarter.
It is also likely to hamper the country’s GDP forecast of 0.5 percent for the year, further pushing the economy to the brink of a downgrade by credit ratings agencies.
The SA Chamber of Commerce and Industry Business Confidence Index (BCI) also shed 0.7 index points in October to measure 91.7 points, compared to 92.4 points in September.
The BCI managed to stay above the 90-point index level in October after dipping below the 90-point index level in August, and was 4.1 points below last year’s October level of 95.8 points.
Manufacturing was one of three largest negative contributors to economic growth in the third quarter, including mining, and transport, storage and communication industries, as it decreased by 3.9 percent and contributed -0.5 of a percentage point.
Economists estimated manufacturing production to decline with a significant 2.7 percent year-on-year in October.
Investec economist Lara Hodes said the outcome, although better than anticipated, was still reflective of a subdued domestic economy.
“Manufacturers continue to face a myriad of challenges, with electricity supply disruptions and elevated administered prices weighing heavily on operational performance,” Hodes said.
“Additionally, local demand remains muted, underpinned by a highly constrained consumer, while strained global trade dynamics undermine South Africa’s export potential.”
StatsSA said five other divisions experienced lower production in October, most notably the glass and non-metallic mineral products, which recorded a 10.7 percent drop in activity.
On a month-on-month basis, however, manufacturing production surprised, increasing by 2.7 percent in October, compared with September, driven by a significant positive contribution by the food and beverages division.