Manufacturing update: Manufacturing production lifts at the start of the Q4.17 period

11 Dec 2017

Annabel Bishop

Chief Economist

Manufacturing production increased by 2.2% y/y in October after declining by 1.7% y/y in September.

Figure 1: Manufacturing growth vs Absa PMI*
  • Manufacturing production increased by 2.2% y/y in October after declining by 1.7% y/y in September.
  • In October, only four of the ten manufacturing divisions registered positive growth. The largest contributions, of a combined 2.9%, to the headline outcome stemmed from the food and beverages and basic iron and steel divisions where production rose by 7.3% and 5.8% y/y.
  • Although the food and basic iron divisions have sustained positive growth, and made positive contributions to the headline outcome, so far this year it has been insufficient to counter the underperformance of the remaining sectors (see figure 2). Specifically, manufacturing production declined by 0.9% y/y in the year to date to October compared to an increase of 0.9% y/y in the same period last year.
  • The quarter to quarter seasonally adjusted basis, the measure used to calculate GDP, rose by 0.8% in October suggesting that the manufacturing sector sustained modestly positive growth that was also registered in Q2.17 and Q3.17 following contractions in the prior three quarters.
  • The advance indications provided by the PMI survey also suggest that the manufacturing sector will make another positive contribution to GDP in Q4.17. Specifically, the average PMI reading for October and November was higher than the average reading for Q3.17 as a whole.
  • Based on the Absa/BER Manufacturing survey for Q4.17, although insufficient demand was rated as the second most serious constraint (after the general political climate) some improvement was noted. Specifically, in terms of domestic demand, volume growth increased and a further rise is expected in Q1.18. Export demand was also reported to have strengthened to four year high levels and survey respondents remained relatively optimistic about the volume of goods exported in 12 months’ time. Should these expectations of strengthening demand conditions materialise and be sustained this will likely translate into increased production and activity.
Figure 2: Year to date manufacturing production by industry type
Figure 3: Manufacturing output volume by industry type
Figure 4: Manufacturing Survey: domestic sales volumes
Figure 5: Manufacturing Survey: export sales volumes