Publications
Partners
Johannesburg - Growth in South Africa’s manufacturing output slowed sharply to 1.0% year-on-year in volume terms in October compared with an upwardly revised 8.1% expansion in September, Statistics South Africa said on Thursday.
Economists polled by Reuters had expected year-on-year output growth of 5.8% in October.
Compared with September, production in volume terms fell by a seasonally adjusted 3.6%, and was up just 2.8% in the three months to October compared with the previous three months.
“I think it’s very concerning. In the past two months we have seen somewhat (of) a recovery in manufacturing production as the sector recovered from the strike action," said Carmen Altenkirch, economist at Nedbank.
“This figure takes us back to the pre-strike trend. It also reflects the slowdown that we are seeing in global growth and this is beginning to filter through into the domestic economy.
"One of the sectors that took the biggest hit was vehicle production, that declined 14%. This relates to the floods we saw in Thailand and a lot of components are manufactured there, which may have hit vehicle production in South Africa.
“We had sharp contraction in mining and that, in conjunction with this very weak manufacturing figure, suggests that fourth-quarter GDP (gross domestic product) data could very well disappoint," she said.
Nomvuyo Guma, maco economic strategist at Standard Bank, said the sector is under pressure.
“In our view, the Reserve Bank has room to cut rates given the compelling evidence of a struggling economy and an inflation trajectory that, while rising, is expected to return to within target range on a sustained basis in 12 months.”
Peter Attard Montalto, emerging market economist at Nomura, said the figure showed a "collapse".
“Much of this is led by export-related industries versus the consumption numbers this morning. We continue to see a strong split between very weak external and much stronger internal demand."
The manufacturing sector contributes about 15% of GDP and is key for creating jobs for the largely unskilled labour force of South Africa, a country with a formal jobless rate of 25%.
Manufacturing contracted by 1.9% in the third quarter after an 8.8% fall in the second quarter. The purchasing managers’ index - a key leading indicator of manufacturing activity - was barely in expansionary territory at 50.5 in October before rising to 51.6 in November.
Economists polled by Reuters had expected year-on-year output growth of 5.8% in October.
Compared with September, production in volume terms fell by a seasonally adjusted 3.6%, and was up just 2.8% in the three months to October compared with the previous three months.
“I think it’s very concerning. In the past two months we have seen somewhat (of) a recovery in manufacturing production as the sector recovered from the strike action," said Carmen Altenkirch, economist at Nedbank.
“This figure takes us back to the pre-strike trend. It also reflects the slowdown that we are seeing in global growth and this is beginning to filter through into the domestic economy.
"One of the sectors that took the biggest hit was vehicle production, that declined 14%. This relates to the floods we saw in Thailand and a lot of components are manufactured there, which may have hit vehicle production in South Africa.
“We had sharp contraction in mining and that, in conjunction with this very weak manufacturing figure, suggests that fourth-quarter GDP (gross domestic product) data could very well disappoint," she said.
Nomvuyo Guma, maco economic strategist at Standard Bank, said the sector is under pressure.
“In our view, the Reserve Bank has room to cut rates given the compelling evidence of a struggling economy and an inflation trajectory that, while rising, is expected to return to within target range on a sustained basis in 12 months.”
Peter Attard Montalto, emerging market economist at Nomura, said the figure showed a "collapse".
“Much of this is led by export-related industries versus the consumption numbers this morning. We continue to see a strong split between very weak external and much stronger internal demand."
The manufacturing sector contributes about 15% of GDP and is key for creating jobs for the largely unskilled labour force of South Africa, a country with a formal jobless rate of 25%.
Manufacturing contracted by 1.9% in the third quarter after an 8.8% fall in the second quarter. The purchasing managers’ index - a key leading indicator of manufacturing activity - was barely in expansionary territory at 50.5 in October before rising to 51.6 in November.
