Manufacturing activity is expected to contribute positively to economic growth in the second quarter after production rebounded the strongest in nearly a year in April on the back of suspended load shedding.
However, there are concerns that the current heightened political uncertainty, as political parties work towards establishing a Government of National Unity (GNU), might hamper demand and place orders on hold at least until there is certainty.
Data from Statistics South Africa (StatsSA) yesterday showed that manufacturing production rose sharply by 5.3% year-on-year in April following an upwardly revised 6.5% slump in March.
This comes on the back of the manufacturing industry being one of the three sectors that drove much of the downward momentum on the production side of the economy as real gross domestic product (GDP) contracted by a marginal 0.1% in the first quarter.
Five of the 10 manufacturing divisions recording a lacklustre period in the first quarter, with the automotive sector the largest negative contributor, pulled lower by weaker demand for new vehicles and transport parts and accessories.
StatsSA’s director of industry statistics, Nicolai Claassen, yesterday said nine of the 10 manufacturing divisions recorded positive growth, with the petroleum, chemical, rubber and plastic products division and wood, paper, printing and publishing the largest positive contributors.
“Manufacturers in petroleum, chemical, rubber and plastic products recorded an increase of 5.1% and wood, paper, printing and publishing activity rose by 9.9% year-on-year,” Claassen said.
“The only division that witnessed a decline in production was furniture and other manufacturing, which decreased by 2.1% year-on-year.”
On a month-on-month basis, seasonally adjusted manufacturing production increased by 5.2% in April compared with March.
This was the largest monthly increase since August 2021 when production rose by 6.4%.
According to the JP Morgan Global Manufacturing Purchasing Managers’ Index, the demand environment globally has improved and “was sustained into April, as rising intakes of new work and a slight expansion of international trade volumes supported mild production growth”.
Investec economist, Lara Hodes, said both the business activity and new sales orders’ indices improved considerably during the month as the more than 30 days of no load shedding likely supported business conditions in the factory sector, as indicated by the Bureau for Economic Research.
“Business confidence among manufacturers also ticked up in the second quarter (although it remains subdued), according to the RMB/BER Business Confidence survey. Specifically, confidence rose by 7 points to 28% – the best level in two years,” Hodes said.
“However, despite April’s positive outcome, domestic demand remains sluggish. Advance indications provided by May’s Purchasing Managers’ Index indicate that conditions in the domestic manufacturing sector deteriorated somewhat in May.
“Heightened political uncertainty led to many orders being placed on hold, while survey respondents noted that orders are drying up as consumers seem to be focusing on necessities.”
BUSINESS REPORT