South Africa’s manufacturing production returned to the negative territory in August as the low-base effect that boosted July’s output faded off. The data strengthens concerns about continuing slack in the sector which contracted 6.3% q/q in Q2 and 2.4% q/q in Q1.
Factory output shrank 0.2% y/y in August after a revised 5.3% growth in July, which was boosted by significant increases in sectors that were hit by the four-week metals and engineering strike last July, preliminary data from Statistics South Africa showed.
Production of basic iron and steel, non-ferrous metal products, metal products and machinery shrank 8.0% y/y in August, reversing a 17.4% y/y surge in July. Production of motor vehicles, parts and accessories and other transport equipment fell 4.4% y/y after a 36.5% y/y jump in July. The two sectors, which were crippled by the strike last July, contributed -1.6pp and -0.4pp, respectively, to the latest output development, compared to positive contributions of 2.9pp and 2.4pp in July.
On a seasonally adjusted monthly comparison basis, factory output grew 0.4% in August, quickening from a 0.1% rise in July. For the three months to end-August, production was 0.3% 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 eight months of the year, factory output widened by 0.3% y/y.
The total sales of manufactured products at current prices edged up 0.3% y/y to ZAR156.5bn ($11.6bn) in August, slowing from an 8.3% y/y growth in the previous month, Stats SA said. On a seasonally adjusted basis, manufacturing sales ticked down 0.1% m/m in August, and were by 2.2% higher in the three months to end-August as compared to the preceding three-month period. In January-August, factory sales were up 2.1% y/y, compared to an average inflation of 4.5% over the period.
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