Figure 1: Manufacturing growth vs Absa PMI*
  • Manufacturing production declined in March by 1.3% y/y, after five consecutive months of positive growth, including February’s mild lift of 0.5% y/y (revised downwards from 0.6% y/y). The March outcome was below market expectations of 1.0% y/y growth.
  • The March data concludes the sector’s production releases for Q1.18 and therefore provides guidance as to the sector’s contribution to quarterly economic growth.
    Manufacturing production dipped by 6.7% in Q1.18 on a quarter on quarter seasonally adjusted annualised basis (qqsaa), which is the measure used to calculate GDP. Therefore the manufacturing sector detracted markedly from the Q1.18 GDP outcome.
  • Looking at a disaggregation of the data, seven of the ten manufacturing divisions made a negative contribution to the headline outcome (see figure 2). Manufacturing production for March was predominantly dragged down by the petroleum products category, which based on its heavy weighting of 24.01%, detracted 1.5% from the topline number. The other key catalyst to the decline was the wood and wood products sector, which reduced the headline outcome by 0.7%.
  • The food and beverages category, which holds the largest weighting in the index, prevented a greater decline in the March outcome, adding 1.5% to the headline outcome, on the back of growth of 6.1% y/y.
  • This outcome is in line with advance indications provided by March’s PMI release, which suggested that business activity waned in March. Looking forward however recent positive developments, including a sharp rise in consumer confidence, coupled with a low inflationary environment and an interest rate cut should boost private consumption and “(e)xpectations for output in Q2.18 are very upbeat”, according to the BER.
Figure 2: Industry contributions to manufacturing production
Figure 3: Manufacturing output volume by industry type