The SA Daily
07 November 2019
Manufacturing struggles on
Shireen Darmalingam
- The global trade war has caused persistent downward revisions to global growth and also constrained manufacturing across the globe. The PMI for the developed world has been below the 50pt benchmark since May this year. However, the PMI for emerging markets has been improving, though only just. The SA PMI this week too managed a negligible rise, to 49.4 pts in October, after 49.2 pts in September. New orders fell for a 16th consecutive month, to 47.8 pts, after 48.8 pts in September.
- The IMF has trimmed global growth forecasts to 3.2% for 2019 and 3.5% for 2020 due to world manufacturing struggling. Nonetheless, we expect modest growth in SA manufacturing into next year. However, there are risks — such as electricity supply, insufficient local and external demand, and rising production costs.
- SA September manufacturing production is due out today; Bloomberg consensus foresees a further decline, after the 1.8% y/y contraction in August which was a third consecutive month of decline when the biggest drops came from iron and steel, non-ferrous metal products and machinery. Manufacturing output fell by 1.7% q/q in the three months to August, from -1.4% q/q in the three months to July.
- The SA manufacturing sector contributed a mere 0.3pps to the GDP increase of 3.1% q/q (saar) in Q2:19, after having subtracted 1.1 pps in Q1:19. The sector will likely have subtracted from GDP growth in Q3:19: in the three months to August, manufacturing production growth contracted by 1.7% q/q (saar), after a decline of 1.4% q/q (saar) in the three months to July. Still, the SA manufacturing sector posted growth of 2.1% q/q (saar) in Q2:19.
Read PDF