Business

SA's manufacturing confidence up

Staff Reporter

Confidence among SA's manufacturers improved in the third quarter, indicating that the worst of the slump in the sector may be over, a survey shows.

Confidence among South Africa’s manufacturers improved in the third quarter, indicating that the worst of the slump in the sector may be over, a survey showed on Monday.

The Bureau for Economic Research (BER) said the manufacturing business confidence index went up to 22, from 11 in the second quarter.

“The survey shows a modest yet clear change of trends when compared with the first and second quarter results. While manufacturing activity is still under pressure, the results confirm that the worst is behind us” said BER economist Christelle Grobler in a statement.

Manufacturing has been hard hit by depressed local and global demand on the back of an international economic downturn, shrinking by 10,9% in the second quarter, from a record 22,1% decline in the first three months of 2009.

As the second biggest contributor to the economy at about 14% of gross domestic product, it weighed on the economy, which fell by 3% quarter-on-quarter in the second quarter, from a 6,4% in the first quarter.

The BER said although domestic sales volume remained negative, the rate of decline was slower and “foreign demand conditions also appeared to be improving, supporting the notion of the beginning of a global recovery”.

Manufacturing employment trends also took a turn for the better, with jobs shrinking at a slower rate than before, the research institution said.

South Africa’s unemployment rate climbed to 23,6% in the second quarter as the biggest economy on the continent shed jobs on the back of the country’s first recession in 17 years.

The BER said general business conditions in the sector seemed to be improving gradually.

“Respondents have not been this positive regarding expected business conditions in 12 months’ time since quarter four of 2007. The slight optimism that has sneaked into the sector has also translated into an up-scaling of longer term-fixed investment plans,” the BER statement said.

In an effort to support the local economy, the central bank has cut the repo rate by 500 basis points to 7.% since December, totally unwinding rate increases in the two years to June 2008.—Reuters

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