/ 11 April 2023

Manufacturing output down 5.2% in February, says Stats SA

Food Production
The broad global agricultural prices are roughly sideways, which is a positive development that bodes well for domestic food prices. (Dwayne Senior/Bloomberg via Getty Images)

Manufacturing output decreased by 5.2% in February year-on-year, according to Statistics South Africa, slightly worse than analysts’ predictions of a 4.3% to 5% contraction.

The largest contributors to the negative print were food and beverages, which decreased by 6.1%, as well as basic iron and steel, non-ferrous metal products, metal products and machinery, down 5.3%, while output in petroleum, chemical products, rubber and plastic products fell 4.7%.

Seasonally adjusted manufacturing production decreased by 1.3% in February compared with the previous month. This followed slight month-on-month increases of 0.5% in January and 0.2% in December 2022.

Economists at Nedbank had forecast that manufacturing production would contract by 5% year-on-year, weighed down by severe load-shedding, combined with weaker global demand and falling commodity prices.

Investec analyst Lara Hodes concurred that the decline in manufacturing production was a result of the dire electricity supply situation, which she said remains a key downside risk to the energy-intensive manufacturing sector.

“Indeed, electricity production and consumption fell by a marked -9.7% year-on-year and -8.7% year-on-year, respectively, in February, with Eskom’s energy availability factor hovering below 55,” Hodes noted.

“February’s manufacturing production result is in line with the movement of the Absa headline purchasing managers’ index [PMI] which slid into contractionary territory in February.”

The Absa PMI fell sharply to 48.1 in February from 53.0 in January, dropping below the neutral 50 mark for the first time since September.

“The February survey period included an unprecedented seven consecutive days of stage six load-shedding, which was likely top of mind for many respondents. Load-shedding once again featured frequently in the commentary where respondents explained why activity declined relative to the previous month,” Absa said.  

Tuesday’s Stats SA data showed that manufacturing sales for February increased by 2.1%, compared with January, after a month-on-month decrease of 0.3% in January and 1.9% in December 2022.

The largest contributors to the sales increase were motor vehicles, parts and accessories and other transport equipment (8.3% increase); petroleum, chemical products, rubber and plastic products (up 2.7%) and basic iron and steel, non-ferrous metal products, metal products and machinery, which added 2.4%.