Manufacturing production registered growth of 1.5% y/y in August, after having contracted in the preceding four consecutive months.
In August, only four of the ten manufacturing divisions registered positive growth. The largest contribution, of 2.0%, to the headline outcome stemmed from the basic iron and steel division where production rose by 11.3% y/y owing to the lift in global commodity prices.
The basic iron and steel division has sustained positive growth in the year to date but this has been insufficient to counter the underperformance of the remaining sectors, with manufacturing production contracting by 1.2% y/y in the first eight months of the year (see figure 3).
Advance indications provided by the PMI and the Q3.17 Absa/BER manufacturing survey suggest that manufacturing production weakened in Q3.17 relative to the prior quarter. At this stage there appears to be a discrepancy between the survey evidence and the actual production data.
Specifically, on a seasonally adjusted basis, which is the measure used to estimate the sector’s contribution to GDP, production increased by 1.3% q/q in the three months to August, versus an increase of 0.8% q/q in Q2.17.
Nevertheless, over the last year the performance of the SA manufacturing sector has diverged from global manufacturing production, which has strengthened. The global PMI and export orders have consistently remained in expansionary territory since mid-2016, suggesting improving momentum in both global production and trade. The comparative underperformance of the local manufacturing sector can be linked to persistently weak domestic demand conditions (see figures 4 and 5).
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.