Low-base effect from last year’s metals strike lifts South Africa’s factory output in July

By bne IntelliNews September 10, 2015

South Africa’s manufacturing production rebounded to a strong y/y growth in July after three consecutive months of declines, mainly due to low-base effect, with significant increases in sectors that were hit by the four-week metals and engineering strike last July.

Factory output rose 5.6% y/y in July after a revised 0.5% decline in June, preliminary data from Statistics South Africa showed.

Production of basic iron and steel, non-ferrous metal products, metal products and machinery widened 17.4% y/y in July, reversing a 4.2% y/y contraction in June. Production of motor vehicles, parts and accessories and other transport equipment soared 39.6% y/y, speeding from an 11.1% y/y growth in June.

The two sectors, which were crippled by the strike last July, contributed 2.9pp and 2.6pp, respectively, to the latest output development. The data suggests that without the low-base effect, manufacturing performance would have remained lacklustre after the industry contracted 6.3% q/q in Q2.

On a seasonally adjusted monthly comparison basis, factory output grew 0.3% in July, slowing from a 0.8% rise in June. For the three months to end-July, production was 1.3% lower compared to the preceding three month period.

The industry is troubled by frequent power outages, which affect manufacturers’ ability to produce and rising input costs, coupled with soft demand, both foreign and domestic. These drawbacks are partly offset by the weak rand, which makes locally manufactured goods cheaper to export.

In the first seven months of the year, factory output widened by 0.4% y/y.

The total sales of manufactured products at current prices rose 8.6% y/y to ZAR158.3bn ($11.4bn) in July, quickening from a 1.1% y/y growth in the previous month, Stats SA said. On a seasonally adjusted basis, manufacturing sales edged up 0.4% m/m in July, and were by 2.2% higher in the three months to end-July as compared to the preceding three-month period. In January-July, factory sales were up 2.4% y/y.

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