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Manufacturing output underperforms in October

8th December 2016

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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South Africa’s manufacturing output delivered a surprise contraction in October, well below the market expectations of a 0.7% to 0.8% increase, indicating that economic activity remains weak and underlying confidence fragile.

New data released by Statistics South Africa on Thursday show a seasonally adjusted manufacturing production decline of 2.7% year-on-year and a 1.9% month-on-month decrease during October, compared with the revised year-on-year uptick of 0.2% in September.

“On a [quarterly] seasonally adjusted and annualised basis, production growth has slipped deeper into the red with a 7.3% contraction in October, mirroring the slippage in the purchasing managers index, business activity and a new sales orders slump seen over the preceding three months,” said BNP Paribas economist Jeffrey Schultz.

“The seasonally adjusted manufacturing production index will have to climb by more than a cumulative 3% in the last two months of the quarter if the sector is to avoid another negative quarterly gross domestic product growth contribution,” he added.

The Nedbank Economic Unit on Thursday said it believed that the 2017 outlook was “rosier”, as total production was forecast to increase off the low 2016 base.

“Import-competing industries are likely to benefit from modest recoveries in fixed investment and consumer spending in 2017,” the unit said, adding that export-orientated industries should also experience more favourable trading conditions, on the back of a US-led acceleration in global growth and moderately higher global commodity prices.

Edited by Creamer Media Reporter

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