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Real Economy News in Real Time
R/€ = 16.22 Change: -0.02
R/$ = 14.33 Change: -0.01
Au 1320.67 $/oz Change: 3.94
Pt 853.19 $/oz Change: 2.97
 
 
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Manufacturing production up 1.6% y/y in November

10th January 2019 BY: Tasneem Bulbulia
Creamer Media Reporter

Manufacturing production increased by 1.6% year-on-year in November, Statistics South Africa reported on Thursday.

The largest positive contributions were made by the food and beverages; and motor vehicles, parts and accessories and other transport equipment sectors.

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The basic iron and steel, nonferrous metal products, metals production and machinery divisions made the biggest negative contributions.

Seasonally adjusted manufacturing production increased by 0.7% in November, compared with October.

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This followed month-on-month changes of 1.1% in October and -0.8% in September.

Seasonally adjusted manufacturing production for the three months ended November increased by 0.8% compared with the previous three months.

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

The largest contributions to the increase in the three months were made by the food and beverage and the petroleum, chemicals, rubber and plastics products sectors.

While output and sentiment within the manufacturing sector have ticked up somewhat, indicated by the latest Absa/Bureau for Economic Research Purchasing Managers Index readings and fourth-quarter manufacturing survey results, business conditions remain tough, with local demand still somewhat subdued, Investec said in a separate statement.

Moreover, it pointed out that operational constraints, notably electricity supply shortages and elevated domestic and imported input cost pressures, continued to hamper activity.

This, coupled with waning global export order growth, underpinned by trade concerns, could continue to constrain growth in the sector.

Also commenting on the release, Nedbank’s Group Economic Unit indicated that the manufacturing sector was forecast to fare moderately better this year than in 2018. 

It noted that export-orientated industries should benefit from a modestly growing world economy and steadier commodity prices, while those industries relying on domestic demand should also fare slightly better.

However, underlying conditions in industries providing inputs to local capital expenditure projects are likely to remain sluggish given the fragile state of business confidence, continually weighed down by rising operating costs, disruptions caused by persistent capacity constraints in key economic infrastructure and continued legislative and regulatory uncertainties. 

The unit indicated that the underlying growth and inflation dynamics still supported a neutral monetary stance.

“While parts of the economy appear to be mending, the pace of recovery remains slow and patchy.”

Therefore, there is no evidence of demand pressure on prices, it stated.

It also noted that cost-push pressures on prices appeared much more contained than towards the end of last year.

It also highlighted that the rand had regained some lost ground in the last two months of 2018 and strengthened a bit further over the past two weeks and that brent crude oil prices remain at relatively low levels, gyrating around the $60/bl mark.

Given these forces, the inflation readings due for release in the next few months are likely to drop quite sharply, probably surprising on the downside, lowering inflationary expectations in the process, the statement indicated.

“This should be sufficient to convince the South African Reserve Bank’s Monetary Policy Committee (MPC) to leave interest rates on hold until around November, when the MPC is forecast to resume its mild tightening cycle.” 

EDITED BY: Chanel de Bruyn Creamer Media Senior Deputy Editor Online
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