South Africa’s manufacturing output surprisingly contracted by 1.3% y/y in November, reversing two consecutive months of growth and posing a risk that the industry will remain in contraction for the fourth straight quarter in Q4, preliminary data from Statistics South Africa showed. Consensus estimates were for a 0.6% y/y growth.
The lackluster production performance in the sector was likely affected by the electricity supply constraints experienced during the month. On December 9, the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), said that the power outages that had been going on since mid-November had resulted in an estimated damage of ZAR6bn ($521.3mn) in lost output for the metals and engineering sector alone.
In October, South Africa’s factory output grew by a revised 2.3% y/y, following an 8.7% y/y surge in September, which was attributed mainly to a 122% y/y jump in the production of the automotive sector that was hit by industrial action a year earlier.
Production of motor vehicles, parts and accessories and other transport equipment dropped 9.1% y/y in November and was the biggest negative contributor to the overall development, contributing -0.9pp. In October, the sector’s output rose 10.3% y/y and contributed +0.9pp.
The food and beverages manufacturing industry was also a significant negative contributor in November, recording a 1.7% y/y decline (+2.1% y/y in October) and contributing -0.4pp (+0.5pp in October). Next, production of glass and non-metallic mineral products contributed -0.3pp based on a y/y drop of 6.8%.
On a seasonally adjusted monthly comparison basis, factory output shrank 2.1% in November, reversing a 0.5% gain in October and undershooting market expectations for a 0.9% y/y growth. For the three months to end-November, however, the manufacturing production expanded by a seasonally-adjusted 4.1% compared to the preceding three-month period, with all 10 manufacturing divisions reporting growth. It was by 2.9% higher y/y. For the first 11 months of the year, factory output was down 0.1% y/y.
The total sales of manufactured products at current prices climbed 6% y/y to ZAR171.86bn in November, decelerating from a 12.5% y/y growth in the previous month, Statistics South Africa said. On a seasonally adjusted basis, manufacturing sales dropped 4.5% m/m in November, but were by 3.9% higher in the three months to end-November as compared to the previous three-month period.
The manufacturing industry, which accounted for 13.4% of South Africa’s total economic output in Q3, contracted for the third straight quarter, with the rate of decline softening to 3.4% from 4.0% in Q2 and 6.4% in Q1. It is further endangered by power outages, which have put significant pressure on manufacturing production since mid-November and are continuing with no resolution in sight.
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