Good news as manufacturing sector posts second month of growth

THE manufacturing sector, which accounts for about an eighth of SA’s economy, grew 4% year on year in May — continuing the return to growth seen in April, when the sector expanded a revised 3.1% (2.9%).

The consensus forecast among economists surveyed by Bloomberg was for growth to slow to 2.4% year on year in May, while Trading Economics had forecast 2.1% growth.

Barclays economists thought a “positive surprise” could be on the cards, following surprisingly good news in its purchasing managers index (PMI) for the sector, and an increase in SA’s exports — though they were less upbeat about the outlook for the sector.

Compared with April, manufacturing output rose 1.6%, after expanding 0.4% in April compared with March, Statistics SA data showed on Tuesday.

The sectors that led the year-on-year increase were:

• petroleum, chemical products, rubber and plastic products (9% and contributing 2.1 percentage points);

• wood and wood products, paper, publishing and printing (6.8% and contributing 0.8 of a percentage point);

• food and beverages (2% and contributing 0.5 of a percentage point);

• motor vehicles, parts and accessories and other transport equipment (4.2% and contributing 0.3 of a percentage point); and

• basic iron and steel, non-ferrous metal products, metal products and machinery (1,5% and contributing 0,3 of a percentage point).

Mixed fortunes

Last week, Barclays released a manufacturing purchasing managers index that beat expectations. It rose to 53.7 points in June, from 50.46 in May, marking the fourth month it had remained in expansion territory above the 50-point mark.

Barclays said the reading was “in line with the recent trade account recovery”, with exports improving. But domestic demand remained weak and currency fluctuations resulting from Brexit could drag the PMI into contraction territory in the months ahead.

Seasonally adjusted manufacturing production increased by 1% in the three months ended May 2016 compared with the previous three months. Four of the ten manufacturing divisions reported positive growth rates over this period.

Last year the sector shrank in the first, second and final quarters.

Capital Economics economist for Africa, John Ashbourne, said the stronger manufacturing numbers added to evidence that SA’s economy had avoided a recession in the second quarter.

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