SA manufacturing production surprised in April, coming in better than expected and reaching the first annual gain in six months.
The improvement in activity suggests manufacturers are becoming progressively more resilient to the effects of load-shedding, as companies reduce their energy dependence on embattled Eskom.
Data released by Stats SA on Thursday shows that production activity increased 3.4% year on year in April, coming in better than market forecasts of 2.5%, pointing to a good start in quarter two GDP growth.
Manufacturing contributes up to 14% to GDP.
Manufacturing production also increased on a monthly basis, rising 0.5% month on month in April, from a downwardly revised 3.4% jump in March and beating market forecasts of a 0.5% decline.
The better outcome for manufacturing output comes despite persistent load-shedding, which saw stage 6 implemented for more than 13 days in April, and reflects some resilience in the broader manufacturing sector, FNB senior economist Thanda Sithole said.
Data shows that annual increase in output was broad-based, with nine out of 10 manufacturing divisions posting growth.
Among the larger divisions, the basic iron and steel, non-ferrous metal products, metal products and machinery division grew 5.3% year on year in April, adding 1.1 percentage points to overall manufacturing output growth.
The food and beverages division also grew 4.6% year on year, while the petroleum, chemical products, rubber and plastic products division grew 2.8%, rebounding from nine consecutive months of annual decline.
Sithole said while the April numbers were stronger than anticipated, near-term activity in the manufacturing sector continued to remain fragile, clouded by the unknown direct effects of load-shedding, particularly during winter, logistical constraints, and moderating domestic and external demand.
“Manufacturing capacity utilisation had fallen at the end of March, primarily reflecting insufficient domestic demand.
This is while the manufacturing PMI tracking expected business conditions over the near term fell to 43.7 index points in May from 51 in April and from a peak of 63.8 in January, indicating that most manufacturers were pessimistic about near-term operating business conditions,” Sithole said.
Africa economist at Oxford Economics Jee-A van der Linde said even though the April numbers point to a good start in quarter two GDP growth, the sector was likely to come under strain in May.
“SA’s Absa purchasing managers' index (PMI) dipped to 49.2 index points in May 2023, down from 49.8 in April,” he said. “The salient business activity index was little changed in May, with the magnitude of load-shedding between April and May being roughly similar and likely not weighing any heavier on activity relative to the month before.”
Van der Linde said those issues, together with the new sales orders index that also remained stuck in negative terrain for the fifth month in a row, would cause some negative pressure for the sector in May.
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