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The SA Daily 14 March 2019

Manufacturing may have made a mild recovery

Shireen Darmalingam

  • January manufacturing production data is due out at 13h00. Bloomberg consensus is for a slight rise to 1.2% y/y, from 0.1% y/y in December when  production had moderated from a revised 1.3% y/y (1.6% y/y) in November. December manufacturing output growth was driven by petroleum, chemical products, rubber and plastics; vehicles and parts; and food and beverages. On a m/m basis, production growth is expected to have contracted by 0.5% in January from an increase of 0.7% in December.
  • In Q4:18, the manufacturing sector contributed positively to GDP; this sector contributes around 12% to overall GDP. In 2018, production growth averaged 1.1%; it had contracted 0.5% in 2017. We expect modest growth in this sector in 2019 — but the risks are to the downside.
  • The manufacturing sector still faces structural challenges such as competition from imports, higher labour costs, rising energy costs, and policy and regulatory uncertainty.
  • Disrupted electricity supply will keep manufacturing under pressure. Already, the PMI for manufacturing slid into negative territory in January and February, which isn’t promising.

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