Manufacturing production increased by 5.5% in June 2023 compared with June 2022, with the largest contributors being the motor industry, the iron and steel sector and food and beverages, but some weakness is expected over the second half of the year.
Investec economist Lara Hodes said in a note the increase was notable following May’s 2.4% year-on-year lift, buoyed by base effects. She said measured on a quarter-on-quarter seasonally adjusted basis, manufacturing output increased by 2.3% and would contribute positively to second-quarter gross domestic product (GDP).
FNB senior economist Thanda Sithole said year-to-date growth in manufacturing output was flat, but an improvement from the 1.2% decline in the same period last year.
Statistics SA said the biggest contributors to the production growth during the month was motor vehicles, parts and accessories and other transport equipment, which saw its production increase 19.5%, and which contributed 1.8 percentage points to the manufacturing data.
Basic iron and steel, non-ferrous metal products, metal products and machinery increased production by 7.5%, contributing 1.6 percentage points to overall production.
The food and beverages sector increased production by 5.8%, contributing 1.3 percentage points to overall production.
Sithole said the manufacturing sector was likely to reflect mild weakness over the second half of 2023, given prevailing load shedding and logistics challenges, as well as moderating global demand.
“This is consistent with the latest manufacturing PMI for July, which remained in contractionary terrain for the sixth successive month in June and fell to 47.3 index points from 47.6 in May. The business activity PMI fell to 38.1 in July from 48.9 in June, indicating a possible relapse in monthly manufacturing output,” said Sithole.
Hodes said also that conditions in the manufacturing sector remained generally subdued, with confidence among players in the industry depressed.
She said June’s PMI survey results showed that the business activity sub-index remained in negative terrain “for a fifth consecutive month”, according to the BER. Indeed, while the electricity supply situation improved somewhat, it continued to impede optimal economic performance. Also the new sales orders sub-index of the PMI also declined reflecting weak demand and lower export activity.
BUSINESS REPORT