By Siphelele Dludla Time of article published26m ago

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JOHANNESBURG – Manufacturing production slipped to a 15th consecutive month of year-on-year decline in August, dragged down by the downturn in the automotive industry as the economy continued its struggle to gain momentum after the easing of the lockdown.

Statistics South Africa (StatsSA) said yesterday that manufacturing output fell 10.8percent on an annual basis compared with August last year.

StatsSA’s director of industry statistics, Nicholas Klassen, said output was much lower than it was a year ago.

Klassen said all manufacturing divisions experienced a slump in activity in the month. “South African manufacturers produced 10.8percent less in August 2020 compared with August 2019,” Klassen said. “The automotive division was the biggest drag on the industry, shrinking by 30.6percent. This was mainly a result of the slowdown in the production of motor vehicles, parts and accessories.”

StatsSA said that basic iron and steel, metal products and machinery were the second-biggest negative contributor, falling 11.7percent. Clothing and textiles experienced its 21st consecutive month of production decline, falling 10.5percent year on year.

The agency said food and beverages declined 6.8percent; wood and wood products, paper, publishing and printing fell 11.9percent, and petroleum, chemical products, rubber and plastic products slumped 5.4percent.

First National Bank economist Geoff Nölting said the manufacturing sector was still facing a number of headwinds in electricity supply and cost constraints, low domestic demand and declining global competitiveness.

“That being said, should government reforms be realised, the longer-term growth outlook for the sector will improve,” Nölting said. “However, this remains an upside risk to our current outlook for the sector.”

On a seasonally adjusted monthly basis, manufacturing production rose 3.6percent in August, compared with July, following a downwardly revised 5.9percent growth in the previous month and 21.3percent in June.

Although the sequential growth in manufacturing was encouraging, factory output was still 5.3percent below pre-Covid-19 levels.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa), however, said the month-on-month performance of manufacturing output was encouraging.

Seifsa chief economist Michael Ade said they expected the broader manufacturing sector to position itself to benefit from a possible uptick in domestic demand during the last quarter of this year as all industrial sectors progressively opened up.

“The continuous improvement in manufacturing output and consequently domestic demand in the medium to long term will depend – among other factors – on the rapid implementation of both the Steel Master Plan and the Presidential Infrastructure Plan, with spill-over benefits to the metals and engineering industry,” Ade said.


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