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The SA Daily 09 September 2019

Manufacturing still insipid

Shireen Darmalingam

  • Statistics South Africa will release the July manufacturing production data tomorrow. Bloomberg foresees output growth as having remained in contraction, at -1.7% y/y, after the 3.2% y/y decline in June, from a downwardly revised 0.4% y/y in May. However, in Q2:19 manufacturing output did manage to grow by 0.5% q/q, after the 2.2% q/q decline in Q1:19, which contributed positively to Q2:19 GDP growth.
  • Last week, the August Absa manufacturing PMI disappointed at 45.7 pts, after posting 52.1 pts in July — with August now a seventh month below 50 pts this year. Eight of the nine sub-indices declined in July; the biggest drop came from the business activity sub-component. The expected business conditions sub-component also reflected a sizeable decline in August. The SA industry-wide PMI rose slightly in August but too failed to breach 50. It posted 49.7 pts in August, after 48.4 pts in July. The new orders sub-component was up a bit, to 49.6 pts in August, from 47.1 pts in July.
  • We still foresee modest growth in SA manufacturing this year but there are entrenched downside risks — such as sustained sluggish domestic demand, slowing global growth due to the global trade war, SA’s unreliable and expensive electricity costs as well as domestic water, rail and port costs.

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