Manufacturing activity contracted for the fourth month in a row in June, Stats SA said on Thursday, as ongoing power cuts limited recovery in the sector and reduced production volumes.
Manufacturing production sank 3.5% year on year, higher than the expected 2.5%. This was worse than the 2.3% fall in May, but better than the 7.6% plunge in April.
The largest contributors to the dive were motor vehicles, parts and accessories and other transport equipment (-17% year on year), food and beverages (-3.8% year on year) and basic iron and steel, non-ferrous metal products, metal products and machinery (-2.9% year on year), which were responsible for a 3.2 percentage point (pp) drop in total.
Motor vehicles, parts and accessories and other transport equipment have been down for the past seven successive months.
Gains in the production of petroleum, chemical products, rubber and plastic products helped offset the overall drop.
The overall decline is in line with the latest Absa PMI survey and continued to reflect the aftermath of the flooding in the manufacturing-intensive KwaZulu-Natal, which caused immense damage to the province’s critical infrastructure and manufacturing plants.
The outlook in the sector remains gloomy as the war in Ukraine continues and the effects thereof, such as inflation, seem set to continue in the second half of the year.
“Tighter global monetary policies will continue to weigh on global growth prospects, resulting in a bleaker outlook for export volumes,” Nedbank economists said in a note on Thursday.
Central banks have hiked interest rates to battle the high inflation. This is threatening weak global growth and reducing demand from SA’s key trading partners. Other local challenges include multiple strikes in different key sectors of the economy and rising costs.
Ongoing problems with load-shedding are hampering the sector, but Nedbank economists said the recent energy reforms announced by President Cyril Ramaphosa are likely to improve the energy shortfall over the medium term.
“On the cost side, producers will face higher input costs as the SA Reserve Bank continues hiking interest rates to control inflation,” the economists wrote.
Update: August 11 2022
This story has new information throughout.
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