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The SA Daily 02 August 2019

Manufacturing still stuck

Shireen Darmalingam

  • Slowing global growth weighs on the manufacturing of all emerging market economies. Manufacturers in Turkey, Indonesia and Mexico are struggling, while manufacturers in Brazil are not quite maintaining positive momentum.
  • SA manufacturing too remains in the doldrums despite the Bureau for Economic Research Manufacturing PMI for July surprising at 52.1 pts yesterday. The index still languished in negative terrain in June, at 46.2 pts. Consensus for July was just 46.5 pts. The July rise into positive terrain is a first this year, and also the best level in three years. However, the now slightly improved sentiment among manufacturers may not be sustainable.
  • Six of the 9 subcomponents in July supported the index, such as business activity, backlog of sales orders, new sales orders, and inventories. However, there was little support from suppliers’ performance and expected business conditions.
  • We still foresee modest manufacturing growth for H2:19. However, the downside risks of shaky electricity supply by troubled Eskom, rising electricity and water costs, subdued domestic demand and global trade tensions will likely keep demand subdued.
  • June manufacturing output data is due out next week. We reiterate that constructive policy reforms are urgently required to ease the pressure on SA GDP growth.

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