In November, only four of the ten manufacturing divisions registered positive growth. The largest contributions, of a combined 2.3%, to the headline outcome stemmed from the food and beverages and basic iron and steel divisions where production rose by 6.0% and 4.6% y/y. Based on their weightings, these two sectors constitute 43% of total manufacturing production.
The food and basic iron divisions have sustained positive growth throughout most of the year and have been the main positive contributors to the headline outcome. The performance of these sectors could be linked respectively, to the partial recovery in the agriculture sector following the 2015/16 drought, as well as the lift in international commodity prices.
However, this has been insufficient to counter the contractions in the remaining sectors (see figure 2). Specifically, manufacturing production declined by 0.6% y/y in the year to date to November compared to an increase of 1.0% y/y in the same period last year.
The lack of broad based growth in the sector underscores the underperformance of the sector amid a cyclical upturn in global manufacturing. By the end of 2017 the global PMI had risen to a seven-year high (see figure 4).
Moreover, over the Q4.17 period, the global PMI reflected above average readings for new manufacturing orders and export orders which suggests a continued expansion in global activity and sustained positive momentum in global trade.
Growth in the domestic manufacturing sector has been constrained by weak domestic demand conditions and depressed business confidence which in turn has been linked to persistent policy uncertainty.
The opinions and views expressed are for information purposes only and are subject to change without notice. They should not be viewed as independent research, recommendations or investment advice of any nature.