Manufacturing in SA: Do you want the good news or the bad news?

(iStock)
(iStock)

Cape Town – Statistics South African and the Bureau for Economic Research (BER) released two separate data sets on Thursday with some good and bad news coming from the domestic manufacturing sector.

Stats SA said manufacturing production increased by 1.9% in in November 2016 compared with November 2015, while the BER said the manufacturing Purchasing Managers’ Index (PMI) remained stuck below the neutral 50-point for a fifth straight month in December 2016.

Stats SA said the November improvement was due to higher production in the basic iron and steel, non-ferrous metal products, metal products and machinery sector (6.1% and contributing one percentage point); the food and beverages sector (2.3% and contributing 0.6 of a percentage point); and the wood and wood products, paper, publishing and printing sector (2.7% and contributing 0.3 of a percentage point).

The BER said the Barclays PMI declined to 46.7 index points in December 2016 from 48.3 in November.

“This is in stark contrast to the sustained upward momentum seen in global PMI figures since mid-2016,” it said in a report on Thursday.

“In all likelihood, the key reason why the South African manufacturing sector is underperforming is the persisting weakness of domestic demand.

“Key supply constraints (most notably load-shedding and strike activity) actually moderated through 2016. A recovery in agricultural output and an uptick in the mining sector on the back of higher commodity prices could support demand going forward.

“However, this could be offset by the outlook for the local consumer, which is more downbeat. On a positive note, the uptick in global industrial activity could benefit local manufacturers targeting the export market in coming months.”

It said the purchasing price index remained unchanged at 65.6 index points in December.

“While the rand exchange rate was slightly stronger compared to November, this was countered by a sharp rise in the Brent crude oil price,” it said.  

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