Rise in factory capacity use signals sector’s rebalancing

The manufacturing sector is showing signs of resilience in the face of a tough operating environment and has increased the application of production capacity.
Pylons carry electricity power lines past cooling towers at the Novovoronezh NPP-2 nuclear power station, operated by OAO Rosenergoatom, a unit of Rosatom, in Novovoronezh, Russia.
Picture:
Pylons carry electricity power lines past cooling towers at the Novovoronezh NPP-2 nuclear power station, operated by OAO Rosenergoatom, a unit of Rosatom, in Novovoronezh, Russia.
Picture: Bloomberg
Factory capacity use jumped in May 2016, data from Statistics SA showed on Thursday.

Production capacity for big manufacturers with turnover greater than R100m a year stood at 81.6% in May 2016, compared to 80.3% in May 2015. This represents a 1.3 percentage point increase.

Barclays Africa economist Miyelani Maluleke said: “This adds to a growing list of signs that manufacturing has picked up from the deep slump and the very weak start to 2016.”

Factors cited to explain the trend include less maintenance downtime, changes in productivity and insufficient demand.

On Monday, the Barclays manufacturing purchasing managers’ index (PMI), a key indicator of activity in manufacturing, recorded a slight dip in July, but remained above 50 for a fifth month in a row. A reading above 50 is considered an indicator of positive output.

On the 52.5 PMI reading recorded in July, Maluleke said the last time the index saw five consecutive above-50 readings was three years ago.

“So, it does look like we have some rebalancing taking place … and we are hoping that this will not be derailed by wage talks in several segments of manufacturing.”

The production capacity survey showed that five out of 10 manufacturing divisions had experienced improved utilisation.

The highest rates of use were in petroleum, chemical products, rubber and plastic products (84.7%); radio, television and communication apparatus and professional equipment (84.3%); motor vehicles, parts and accessories and other transport equipment (83.1%); food and beverages (82.4%), and wood, wood products, paper, publishing and printing (82.2%).

Despite all this activity, electricity consumption declined 2.2% year on year in June after contracting 0.8% year on year in May.

Seasonally adjusted electricity consumption decreased 1% month on month in June 2016, following month-on-month changes of 0.6% in May 2016 and a 0.3% decline in April 2016. Seasonally adjusted electricity consumption decreased 0.4% in the second quarter.

Electricity production grew, at a slower pace, in June compared with May.

Electricity production rose 0.4% year on year in June 2016 after increasing 1% year on year in May 2016.