SA’s manufacturing production increased above market expectations in May, marking a second successive annual gain in industrial activity, Stats SA data released on Tuesday shows.
Manufacturing activity increased 2.5% year on year in May, following an upwardly revised 3.6% surge in the prior month. The outcome is above market forecasts of a 2.3% rise.
Africa economist at Oxford Economics Jee-A van der Linde said the increase showed manufacturers were becoming progressively more resilient to the effects of load-shedding as companies reduced their energy dependence on Eskom.
RMB chief economist Isaah Mhlanga said given the increased intensity of load-shedding in 2022, and especially the first half of this year, one would have expected overall manufacturing production volumes to have contracted a lot given that the manufacturing sector is a heavy user of electricity.
Stats SA data shows the increase in activity was mainly boosted by the manufacture of motor vehicles, parts and accessories, and other transport equipment category, which increased 15.1% compared with 4.9% the previous month.
The basic iron and steel, non-ferrous metal products, metal products and machinery category also positively contributed to the overall headline, increasing 5.8% in May compared with 4.7% previously.
Manufacturing is a R513bn sector in real gross value-added terms and comprised 11.2% of the economy in the first quarter of 2023, down from 15% in 1995.
It is the fourth-biggest sector, employing nearly 1.2-million people, according to the first quarter of 2023 quarterly employment statistics, which is a survey of formal business establishments.
While the annual increase reflects positive movement, the manufacturing sector has been shrinking over time with negative employment and income consequences.
This can be seen in the monthly figures, which captured a decline by -1.3% in activity.
FNB senior economist Thanda Sithole maintains the view that near-term activity in the manufacturing sector remains fragile and clouded by the uncertain direct impact of load-shedding, particularly during winter.
He said transport and logistical constraints, as well as moderating domestic and external demand, also continue to impact activity.
“This is consistent with the latest manufacturing PMI for June, which remained in contractionary terrain, below the 50 neutral mark for the fifth successive month, and, in fact, fell to 47.6 index points from 49.2 in May, despite load-shedding reprieve,” Sithole said.
Update: July 11 2023
This article has been updated with comment.
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