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Manufacturing production drops in May

Jul 11 2017 16:00
Lameez Omarjee

Johannesburg – Manufacturing production underperformed, declining 0.3% for the month of May, despite an expected growth of 0.5%, said an analyst.

Statistics South Africa (Stats SA) released the manufacturing data for May on Tuesday. Manufacturing production decreased 0.8% between May 2016 and May 2017. Production also contracted by 0.3% in May, compared to growth of 2.3% reported in April.

Manufacturing activity is still below levels reported before the global financial crisis in 2008, said Kevin Lings, Stanlib chief economist. The sector has had an annual growth of -0.3% over the past 12 months, and is still in recession, he added.

The contraction is mainly attributable to the 3.4% decline in vehicle output and a 3.6% contraction in chemical production. There was also a 1.5% contraction in food and beverage production.

Clothing production was up 3.2% for the month, and iron and steel production also rose 2.8%.

“Over the past year, South Africa’s better performing manufacturing sectors have been food, various metal products, and communication equipment. Most other sectors have either contracted or stagnated,” said Lings.

For 2017, manufacturing production is expected to decline 1%. During 2015, the manufacturing sector reported growth of -0.04%, the worst annual performance since the 2009 recession where the sector saw a 13.5% decline, said Lings. The sector only grew by 0.8% in 2016.

The sector has been performing poorly despite policy initiatives to boost the sector as well as a weaker exchange rate. An improvement in agriculture and mining activity could help the sector and prevent a further decline, said Lings.

READ: 'Downturns in business to dent manufacturing sector'

Following the release of the Purchasing Manager’s Index last week, Investec economist Kamilla Kaplan said that manufacturing data was expected to take a knock. The PMI for June dipped to 46.7, from 51.5 reported in May. 

“Downturns in business activity and new sales orders were key contributing factors to the overall deterioration in the sector’s performance in June,” she said. 

Manufacturing production decreased 4.1% year-on-year for April 2017, Fin24 previously reported. Manufacturing contributed 0.5% to the overall 0.7% contraction in GDP for the second quarter of 2017. 

Read Fin24's top stories trending on Twitter:

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