Last month’s “intense load shedding” has sent the manufacturing sector back into a contraction. That’s according to the Absa purchasing managers' index (PMI) for September, which fell into negative territory.
The Absa PMI, which had rebounded in August, has been below for two of the three months in the third quarter falling to 48.2 index points in September, down from 52.1 in August while in July it fell to 47.6 points. This could mean that the level of recovery that was expected from the depressing sector’s performance in the second quarter may not come to pass. In the second quarter, manufacturing declined by 5.9% and shaved off 0.7% of GDP growth.
In the three months to June, manufacturing production, which is the fourth largest sector in the country’s economy and contributes about 14% to the GDP, was set back by the floods in KwaZulu-Natal in April and increased load shedding.
Increased load shedding has been the biggest thorn in the country’s industrial sector, which includes mining, manufacturing and electricity industries that combined account for about 20.5% of South Africa's GDP and all of which have been on a downward trajectory.
Investec chief economist Annabel Bishop noted: “Industrial production contracted in July by -0.8% year-on-year, heralding downwards pressure on South Africa’s GDP. We expect GDP to lift in the third quarter on base effects following the contraction in quarter two, but economic activity will likely be relatively weak as global growth slows.
“South Africa is now likelier to record economic growth of closer to 1.8% this year and is at risk of a slowdown towards 1.0% next year as the US and the EU are both seen at high risk of recession, while South Africa is consequently at risk of growth stalling around year-end,” she said.