South Africa’s factory output surprised on the upside and unexpectedly rose for the third month in a row, buoyed by an increase in car, food and beverages production in September, despite the severe and more frequent load shedding.
Statistics South Africa (Stats SA) said yesterday that manufacturing production increased by 2.9% in September compared to the same month a year ago.
This was the third consecutive month of increases and was better than market expectations of a 2.35% decline.
The energy-intensive manufacturing sector has been dealing with logistical challenges while persistent and heightened power cuts were particularly severe in September, reaching Stage 6 load shedding at times and remaining a key operational hindrance.
Stats SA said the largest positive contributions came from the manufacture of motor vehicles, parts and accessories and other transport equipment, which rose 43.2%, while food and beverages production increased by 8.1%.
After declining by 5.2% in the second quarter to June, manufacturing production increased in the third quarter ending in September, rising by 1.9% on a seasonally adjusted basis.
Stats SA director of industry statistics Nicolai Claassen said seven of the 10 manufacturing divisions reported a rise in activity in the third quarter, led by increases in the automotive division and food and beverages.
“The automotive division was the largest positive contributor, increasing output by 21.1%. This was mainly associated with the production of ports and accessories,” Claassen said.
“Manufacturers in food and beverages recorded an increase of 4%, driven largely by stronger production in the other food products group, which includes the manufacturing of sugar, spices and condiments, as well as the beverages group.”
Nedbank economist Isaac Matshego said the recovery in manufacturing in the third quarter was encouraging and pointed to the sector making a positive contribution to aggregate gross domestic product following the negative contribution in the second quarter.
“We expect the industry to show further improvement in the final quarter,” Matshego said. “However, the momentum will be weaker due to the intense power outages and the effects of the Transnet labour strike in October. Softer global demand due to higher interest rates and Russia-Ukraine war-related disruptions will also dampen overall activity in manufacturing.”
On a month-on-month basis, Stats SA said seasonally adjusted manufacturing output increased the most in 10 months by 4.9% in September, compared with August.
As a result, the manufacturing sector is expected to contribute positively to third-quarter gross domestic product.
FNB senior economist Thanda Sithole said while the monthly momentum was encouraging, it contradicted the manufacturing Purchasing Manufacturers Index, which had signalled a possible monthly decline.
The headline PMI moved back into contractionary territory in September, underpinned by a sharp fall in the business activity and new sales orders sub-indices.
“While manufacturing activity encouragingly rebounded in the third quarter, the extent of the recovery remains constrained on account of the ongoing load shedding and moderating external demand,” Sithole said.
“In the near term, manufacturing activity should be supported by moderating input costs, easing supply chain pressures and still resilient domestic demand. Measures to improve ports and rail efficiencies and reduce production costs to increase competitiveness are critical in the longer term.”
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