SA’s manufacturing output plummets

Manufacturing output in South Africa plummeted 7,0% year-on-year in December from the previous month’s revised 6,4%.

In the fourth quarter of 2008, manufacturing production fell 5,7%, substantially worse than the contraction of 2,7% in the third quarter last year.

Absa Capital said on Tuesday the data provide further evidence that the South African economy is struggling under the pressures of the global economic slowdown.

“The production cuts and extended holiday periods in a number of steel and motor vehicle manufacturing plants, as well as the high weighting of their products to overall manufacturing production, validate today’s grim number,” it said.

“As far as growth is concerned, we believe the South African economy is in the midst of a technical recession with many other recent high-frequency indicator releases [vehicle and retail sales] adding to the gloomy outlook. These, together with today’s poor manufacturing number, lead us to believe
that gross domestic product growth should contract 1,0% to 1,5% in the fourth quarter of 2008,” Absa Capital added.

It said the detail yielded few surprises with motor vehicle parts and accessories falling 33,1% year-on-year (previously 23,8%), in line with the recent contraction in motor vehicle sales (35,4% year-on-year) and confirming the bank’s expectations that the extended shutdown of motor vehicle plants hampered production.

Basic iron and steel as well as petroleum, chemicals, rubber and plastic production also contracted heavily by 21% and 4,3%, respectively. Although a marginal improvement from November, furniture and other manufacturing divisions continued to reflect pressure on durable goods spending, falling 5% in December (6,4%).

PMI data continue to suggest that the first quarter of 2009 is unlikely to provide any kind of respite for manufacturing activity, with the recent January PMI new sales orders sub-index falling to 33,2% in January from 37,5% the prior month — again the lowest reading in the history of the index.

“Although the South African economy may not be experiencing the magnitude of problems experienced by many countries in the developed world, the situation is likely to get worse before it improves. To give an idea of the extent of the global recession, one only needs to look at the extent of the slowdown in the United States, Eurozone and China.

“While the contraction in domestic activity may not be as pronounced as in these countries, it gives a good indication of the extent of the slowdown in global economic activity and is consistent with our view of deterioration in South Africa’s export growth.

“Considering the worsening global environment, we continue to forecast poor growth prospects in South African manufacturing activity for much of 2009 as both domestic and global demand dries up. For rates, the poor data support our call for a 100 basis points cut at the next MPC [Monetary Policy Committee] meeting. The official date remains April 16, though continued deterioration in the growth outlook could spark an emergency MPC meeting following last week’s comments by the South African Reserve Bank governor,” Absa Capital said. — I-Net Bridge

We make it make sense

If this story helped you navigate your world, subscribe to the M&G today for just R30 for the first three months

Subscribers get access to all our best journalism, subscriber-only newsletters, events and a weekly cryptic crossword.”

Related stories


Already a subscriber? Sign in here


Latest stories

Noxy Goyi’s story of survival is one of a woman’s...

The breadwinner lost her job and, desperate not to sit at home, she started selling food on the street on a table made of bread crates. Now she employs two people

Three ‘gringos’ brave heat, mosquitos, illegal gold miners and pirates...

A Wits University accounting professor has returned from his Amazon expedition he undertook to fight climate change

Fintech firms ramp up investments in Kenya’s microfinance space

Kenya’s microfinance banks are the target of fintech firms from abroad seeking to sidestep stringent regulatory perimeters for digital lenders

Harbour views at 9th Avenue Waterside

The award-winning eatery, which offers fine wines and food, is on stilts at Durban’s harbour

press releases

Loading latest Press Releases…