Manufacturing production dips in June but edges higher overall in 2nd quarter

Cape Town - Manufacturing production decreased by 2.3% in June 2017 compared to the previous year, Statistics South Africa announced on Thursday.

The largest negative contributions to production were reported in the petroleum, chemical products, rubber and plastic products (-10.6%) and wood and wood products, paper, publishing and printing (-4,0%).

The food and beverages sectors (up 1.9%) and basic iron and steel and non-ferrous metal products, metal products and machinery (a 2.4% increase) contributed positively to manufacturing production.

Seasonally adjusted manufacturing production was flat in June 2017 compared with May 2017. This followed month-on-month changes of -0.3% in May 2017 and 2.2% in April 2017.

Seasonally adjusted manufacturing production increased by 1.5% in the second quarter of 2017, compared with the first quarter of 2017.

Six of the ten manufacturing divisions reported positive growth rates over this period.

The standout contributors were the food and beverages division (4.1%) and the motor vehicles, parts and accessories and other transport equipment division (3.7%). 

Manufacturing production contracted in each of the three months in the second quarter of 2017, but on a seasonally adjusted basis production increased by 1.5% quarter on quarter, compared to a decline of 0.7% quarter on quarter seasonally adjusted in the first quarter of this year. As this measure is used to estimate the sector’s contribution to GDP it therefore suggests a positive contribution, following three consecutive quarters of negative contributions, says Kamilla Kaplan, Investec economist. 

Elize Kruger, analyst at NKC African Economics, points out that the manufacturing sector managed to recover in the second quarter, albeit off a very low base. 

"Given that the manufacturing sector contributes around 12.4% to GDP, the exit from recession in the second quarter will result in a notable positive contribution to overall economic growth in the quarter,However, the sector is not out of the woods yet, due to continued weak domestic demand and only moderate global demand for locally manufactured goods as well as low household and business confidence levels that strain the sector," Kruger said.  

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