Manufacturing sector posts third month of growth in June

The manufacturing sector, which accounts for about an eighth of SA’s economy, grew 4.5% year on year in June following a revised increase of 3.9% (4%) in May, Statistics SA data showed on Thursday.
Nissan manufacturing plant.
Picture:
Nissan manufacturing plant.
Picture: Robert Tshabalala
The consensus forecast among economists surveyed by Bloomberg was for growth to come in at 3.1% year on year in June, while Trading Economics had forecast 3.59% growth. A median consensus forecast from a BDlive survey of five economists showed output was expected to have slowed to 2.8%.

FNB economists thought manufacturing would have “held up” in June.

Compared with May, manufacturing output rose 0.1% in June, after expanding 3.3% in May compared with April.

The sectors that led the year-on-year increase were:

petroleum, chemical products, rubber and plastic products (15.4% and contributing 3.4 percentage points);

wood and wood products, paper, publishing and printing (4.4% and contributing 0.6 of a percentage point); and

food and beverages (2% and contributing 0.5 of a percentage point)

Manufacturing production increased 2% in the second quarter, compared with the first. The biggest contributors to this increase were:

petroleum, chemical products, rubber and plastic products (3.9% and contributing 0.9 of a percentage point);

motor vehicles, parts and accessories and other transport equipment (7.2% and contributing 0.5 of a percentage point); and

food and beverages (1,9% and contributing 0.5 of a percentage point).

Last year the sector shrank in the first, second and final quarters.

The latest data are a strong indication that manufacturing contributed positively to economic growth in the second quarter. If the economy grows in the second quarter, it will have avoided a technical recession or two consecutive quarters of economic contraction.

An improvement in manufacturing production was consistent with developments in the Barclays purchasing managers’ index (PMI), Investec economist Kamilla Kaplan said in a research note ahead of the release. The PMI – a key indicator of activity in the manufacturing sector -averaged 53.5 in the second quarter “signalling a modest increase in manufacturing sector activity throughout the second quarter.” Kaplan said.

While SA was still seen as the most competitive manufacturing country in Africa, it was losing momentum when compared to global leaders such as China and others, the Deloitte 2016 Global Manufacturing Competitiveness Index (GMCI) found on Wednesday. SA fell three places to 27th on the index.

The study is conducted every three years and is designed to help global industry executives and policy makers evaluate drivers that are key to company and country level competitiveness.