The manufacturing sector contracted in July, with production down 0.7% from the same month a year earlier, Stats SA data showed on Thursday.
The decline points to muted third-quarter momentum, echoing last week’s weak survey indicators. Manufacturing accounts for about 13% of GDP.
In August, factory activity slipped back into contraction, with the Absa purchasing managers’ index (PMI) falling to 49.5.
The RMB/BER business confidence index edged down to 39, extending the five-point fall recorded in the second quarter. The reading remains below the long-term average of 42, showing that more than 60% of businesses are dissatisfied with prevailing conditions.
Investec economist Lara Hodes pointed out that according to the JPMorgan Global Manufacturing PMI survey factory activity slipped back into contraction at the start of the third quarter, signalling weaker global demand conditions.
“Manufacturers are faced with an increasingly volatile and challenging trading environment on both the global and domestic front,” she said.
Jee-A van der Linde, Oxford Economics senior economist, noted that mining and manufacturing were among the key drivers of growth in the second quarter.
Manufacturing output grew 0.8% in the quarter contributing 0.2 percentage points to overall GDP growth.
Responding to both manufacturing and mining output, which was also released on Thursday, Van der Linde said: “There isn’t a reason to be overly optimistic about the industry’s near-term outlook given binding supply-side constraints.”
The largest drag in Thursday’s manufacturing data came from basic iron and steel, non-ferrous metals, metal products and machinery, which shrank 3.3% and cut 0.7 of a percentage point from overall production. Wood, paper, publishing and printing also detracted, declining 1.8% and subtracting 0.2 of a percentage point.
On a seasonally adjusted basis, manufacturing output fell 0.5% month on month in July, reversing gains of 0.4% in June and 2.3% in May.
Despite the weaker monthly and annual readings, the broader quarterly trend remained positive. Seasonally adjusted production increased by 2.5% in the three months to July compared with the previous three months, with seven of the 10 manufacturing divisions posting growth. Food and beverages led the gains, rising 3.4% and adding 0.9 of a percentage point, followed by petroleum, chemicals, rubber and plastic products; and motor vehicles, parts and transport equipment.
Manufacturing sales reflected a similar pattern. Seasonally adjusted sales slipped 0.3% month on month in July, after gains of 2.2% in June and 1.9% in May. Over the three months to July, however, sales rose 2.6% from the previous three months. The biggest boosts came from food and beverages, and petroleum, chemicals, rubber and plastic products.
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