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The SA Daily 08 August 2018

Manufacturing disappoints

  • SA June manufacturing production has disappointed at 0.7% y/y (expectations were 2.2% y/y), and also below the downwardly revised 2.0% y/y in May. On a q/q basis, production contracted 0.1% q/q (seasonally adjusted) in Q2:18, compared to the 2.1% q/q contraction in Q1:18. Therefore, the manufacturing sector likely contributed negatively to real GDP growth in Q2:18.
  • Still pending Q2:18 data, such as retail sales and mining production, will shed further light on whether SA can avoid a technical recession (i.e. another quarter of negative GDP growth, after the -2.2% q/q of Q1:18). For now, we keep our real GDP growth forecast of 1.7% for 2018 — but the risks are to the downside.
  • Recall last week, the Absa manufacturing PMI increased to 51.5 pts in July, from 47.9 pts in June, implying that manufacturing production might strengthen at the start of Q3:18. But, the risks are still to the downside, with only  modest growth foreseen for H2:18 (see June manufacturing production: 0.7% y/y of 07 August by Thanda Sithole).

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