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Manufacturing production dropped by 1% in November

Cape Town - Manufacturing production decreased by 1% in November 2015 compared with November 2014, Statistics South Africa announced on Tuesday.

This was mainly due to lower production in the metals industry, which brought down the total by 1.3 percentage points, having contracted by 7%.

Seasonally adjusted manufacturing production decreased by 1.2% in November 2015 compared with October 2015, following month-on-month changes of -1.7% in October 2015 and 2.3% in September 2015.

In the three months ended November 2015, seasonally adjusted manufacturing production increased by 0.9% compared with the previous three months. Six of the 10 manufacturing divisions reported positive growth rates over this period.

The main contributor to the 0.9% increase was the petroleum, chemical products, rubber and plastic products division, contributing 1.3 percentage points after recording a 5.9% increase.

According to Nedbank the outlook for 2016 remains gloomy.

"Manufacturing production is forecast to decline further, dragged down by weak global demand, excess global production capacity, depressed commodity prices, significant domestic infrastructure constraints, high cost structures, muddled economic policies and fading domestic demand," the banking services provider said on Tuesday.

The sharply weaker rand is unlikely to fully compensate for the adverse impact of these many obstacles. The Reserve Bank's Monetary Policy Committee (MPC) faces another challenging year, according to Nedbank.

"Although the economy is hardly growing and likely to fade further, the MPC's focus will probably remain on the upside risks posed to inflation by the severe drought and the dramatic collapse of the rand in late 2015 and early 2016.

"The MPC is likely to argue that there is still considerable downside for the rand as investors' appetite for risky emerging markets wane in the face of the turmoil in China, the slump in commodities and the prospects of further US rate hikes," it said.

The Bank is forecast to send a strong signal in January, hiking official rates by 50 basis points. Thereafter, two more hikes of 25 basis points each are forecast in March and May.

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