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Manufacturing production for June worse than expected

Aug 08 2019 19:41
Lameez Omarjee, Fin24

Manufacturing production decreased by 3.2% in June, against market expectations of a 1.6% decrease.

Stats SA on Thursday released the latest figures, which reflected a considerable deterioration from May's modest improvement of 0.4%.

There was a decline in production levels in all sectors, except food and beverages, which increased by 3.7%.

"A breakdown of June’s data suggests that the decline was broad based, with only the food and beverage category experiencing growth," Investec economist Lara Hodes noted in a report.  

"The Petroleum, chemical products, rubber and plastic products sector, which comprises a marked 23.1% of the manufacturing index, was the largest negative contributor to June’s outcome.

"It declined by 6.7% y/y, in turn slicing 1.7% off the topline number, with the coke, petroleum products and nuclear fuel segment predominantly responsible for the disappointing result," Hodes added.

"In all, the potential of a solid recovery in manufacturing output remains constrained by the lack of sustained demand. Domestically the consumer remains under pressure, with unemployment sitting at 29.0%, while globally lingering trade war tensions could further impede export prospects," she said.

Steel and Engineering Industries Federation of Southern Africa economist Marique Kruger said the decline in production figures reflects the "constrained" business environment for manufacturing companies.

"The dip in the year-on-year manufacturing output data highlights the urgent need to deal with underlying dynamics leading to a depressed economic environment and high unemployment numbers," she added.

However, Kruger anticipates an upturn in second quarter GDP figures and said companies in the manufacturing sector should take advantage of this to grow the economy and create jobs.

production  |  factory  |  manufacturing
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