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Q4 Absa manufacturing survey reflects decline in business confidence for second time in a row

The fourth quarter Absa Manufacturing Survey released yesterday showed that business confidence in the sector declined for the second quarter in a row, in the three months to December. Picture: Leon Nicholas.

The fourth quarter Absa Manufacturing Survey released yesterday showed that business confidence in the sector declined for the second quarter in a row, in the three months to December. Picture: Leon Nicholas.

Published Dec 10, 2021

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SENTIMENT among local manufacturers has remained subdued about the future, due to uncertainty caused by the fourth wave of Covid-19 infections and loadshedding.

The fourth quarter Absa Manufacturing Survey released yesterday showed that business confidence in the sector declined for the second quarter in a row, in the three months to December.

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Absa said that overall, business confidence dipped by 3 index points to 38 points during the quarter, remaining firmly in the contractionary territory below the 50-points mark.

The quarterly survey, which covers at least 700 businesspeople in the manufacturing sector, was conducted by the Bureau for Economic Research (BER) between October 27 and November 15, 2021.

According to the survey, the majority of manufacturers were feeling pessimistic about the future, with expectations regarding business conditions for the next 12 months falling by 12 points.

Head of the manufacturing sector at Absa Retail and Business Bank, Justin Schmidt, said the results this quarter were a mixed bag, highlighting the “stop-start” recovery the sector was facing.

Schmidt said this was not surprising that manufacturers were feeling concerned about the future, given the uncertainty around the current economic situation.

“The risks surrounding the fourth wave of Covid-19, water shortages across provinces, continued loadshedding at a heightened level of intensity, as well as the recent industrial action in the steel industry, have contributed to the negative outlook,” Schmidt said.

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However, there seems to be some green shoots as manufacturers saw an improvement in their volume of domestic and export sales, and a significant increase in their domestic and export selling prices.

“An improvement in expectations regarding imports and exports over the next 12 months is potentially indicative of improved demand levels and the easing of shipping constraints,” Schmidt said.

Meanwhile, manufacturing production in South Africa plunged by 8.9 percent in October from a year ago, following a downwardly revised 0.7 percent rise in September.

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This was the largest decline in factory output since August 2020, and more than the expected 0.85 percent drop.

Statistics South Africa (StatsSA) yesterday said the main negative contributions came from the manufacture of petroleum, chemical products, rubber and plastic products.

On a monthly basis, manufacturing output shrank 5.9 percent compared to a 3.8 percent growth the previous month.

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Total manufacturing sales declined by 1.4 percent year on year in October to reach R221.3 billion, with a monthly decline of 5.8 percent from September 2021.

The Don Consultancy Group chief economist Chifi Mhango said the manufacturing production print suggested that more government intervention was required to support the struggling sector.

“Creating a conducive environment to attract investment into the manufacturing sector should be the key priority of the government,” Mhango said.

“There has to be strong monitoring of compliance to the local procurement of manufactured goods for all government-related infrastructure projects, with private sector support.”

Minister in the Presidency Mondli Gungubele said the government continued in its target-driven work to restore business confidence through specific interventions, such as large investments in infrastructure.

“Through the Department of Trade, Industry and Competition, the government continues to support local production, including the revival of South Africa’s manufacturing industry,” Gungubele said.

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BUSINESS REPORT ONLINE

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