The manufacturing industry could drag South Africa’s economic growth prospects in the fourth quarter of 2024 if it declines for the second consecutive month in December after output plunged to its lowest level in five months in November.
This comes as real gross domestic product (GDP) measured by production decreased by 0.3% in the third quarter of 2024, following an increase of 0.3% in the second quarter.
Data from Statistics South Africa (Stats SA) showed that manufacturing production declined by 2.6% year-on-year in November 2024, following an upwardly revised 0.9% increase in October.
This marked the steepest contraction in manufacturing activity since June 2024, mainly attributed to lower production of motor vehicles, parts and accessories and other transport equipment.
Stats SA further said the largest negative contributions were also made by the basic iron and steel, non-ferrous metal products, metal products and machinery; wood and wood products, paper, publishing and printing and textiles, clothing, leather and footwear divisions.
However, the largest positive contribution was made by the petroleum, chemical products, rubber and plastic products division.
On a seasonally adjusted monthly basis, industrial output shrank by 1.1% in November, the sharpest decline in six months, after an upwardly revised 0.8% increase in October.
Seasonally adjusted manufacturing production decreased by 0.2% in the three months ended November 2024 compared with the previous three months.
Stats SA said four of the 10 manufacturing divisions reported negative growth rates over this period. The largest negative contribution was reported for the food and beverages division while the largest positive contributions were reported for the basic iron and steel, non-ferrous metal products, metal products and machinery division, and the furniture and other manufacturing division.
All this comes on the back of the seasonally adjusted Absa Purchasing Managers’ Index (PMI) in South Africa dipping for the second month in a row in December.
Absa this week said the PMI fell to 46.2 in December 2024, down from 48.1 in November, marking the steepest decline since August, with both the business activity index and the new sales orders sub-index showing declines.
Export sales fell to their lowest levels since the first half of 2024, while the supplier deliveries index rose above 50 for the first time in three months.
On a positive note, the sub-index measuring expected business conditions in six months increased, reflecting optimism about the future.
However, the S&P Global South Africa PMI also dropped below the 50.0 neutral threshold at the end of 2024, falling to 49.9, from 50.9 in November, and signalling a fractional decline in private sector business conditions.
S&P said muted demand conditions led to a stalling of sales growth and the sector was also influenced by a rise in inflationary pressures, as quickening cost burdens drove a solid uptick in firms' selling prices.
"December's PMI data suggest that the South African economy may have lost a little bit of steam at the end of 2024. New orders failed to grow after going on an
impressive run in the latter stages of the year, as firms highlighted a more muted demand environment,” said David Owen, senior economist at S&P Global Market Intelligence.
“They also faced accelerated cost pressures, as wage inflation quickened, and material and transport prices rose.”
BUSINESS REPORT