Manufacturing output remained in negative territory as industry battled headwinds, recording another contraction in January. 
Picture: Pixabay
Manufacturing output remained in negative territory as industry battled headwinds, recording another contraction in January. Picture: Pixabay

Output remains negative after contraction and load shedding

By Siphelele Dludla Time of article published Mar 13, 2020

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JOHANNESBURG - Manufacturing output remained in negative territory as industry battled headwinds, recording another contraction in January.

Statistics South Africa said yesterday that manufacturing production had fallen 2percent year-on-year after decreasing 5.9percent in December.

The January print is the eighth consecutive month of annual growth declines in the manufacturing activity.

Investec economist Lara Hodes said the output was reflective of South Africa’s delicate economic situation, underpinned by weak demand and exacerbated by global challenges.

“Domestically, heightened electricity supply disruptions continue to weigh on production, while household balance sheets, impacted by elevated unemployment rates, impede consumer demand,” Hodes said.

“The potential impact of the coronavirus outbreak on global growth and trade persists,” she said.

According to IHS Markit, the disruption to demand, supply chains and international trade flows resulting from the coronavirus outbreak led to the steepest drops in global economic activity and new business in February since mid-2009.

In January, Eskom implemented power cuts as companies reopened for the year and resumed production, despite having promised to prolong power supply.

StatsSA said the largest detractors were wood, publishing and printing products, at 6.7percent year-on-year.

This was followed by motor vehicles, parts and equipment as well as textiles, clothing and footwear.

Only one of the glass and non-metallic mineral products recorded a 1.3 percent improvement year-on-year.

On a month-to-month basis, January manufacturing production increased by 2.5percent on a seasonally adjusted basis, following decreases of 3percent in December and 1.8percent in November.

But in the three months ended January, manufacturing production decreased by 1.8percent quarter-on-quarter, as eight of the 10 divisions declined over this period.

FNB economists said they anticipated that manufacturing production would remain subdued in the near term, given the reccurrence of load-shedding and disruptions to various global supply chain networks due to the spread of the coronavirus.

Mining production recorded its third consecutive annual increase in January on the back of iron ore, platinum group metals (PGMs) and coal.

StatsSA said mining output had risen by 7.5percent year-on-year following a 1.8percent year-on-year increase in December.

Hodes said iron ore’s run, however, was likely to be impeded by the anticipated sharp slowdown in industrial demand as a result of a global trade and growth fallout, particularly from China as Covid-19 continues to spread.

The SA Revenue Service said 31percent of mineral product and 14percent of iron and steel product exports in 2019 were to China.

“Domestic challenges serve to exacerbate the global situation for mining companies, as electricity supply disruptions continue to weigh on production. The mining sector is reliant on stable, affordable electricity supply to operate optimally,” Hodes said.

BUSINESS REPORT

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