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The SA Daily 12 April 2019

Manufacturing down more

Shireen Darmalingam

  • Statistics SA released the February manufacturing production data yesterday. Bloomberg consensus was for output growth to have increased to 0.5% y/y in February, from an increase of 0.3% y/y in January. Growth however surprised somewhat, at 0.6% y/y, from an upwardly revised 0.9% y/y in January.
  • On a q/q (sa) basis, manufacturing production moderated further in the three months to February, to -0.6%, from 0.6% in the three months to January. This moderation dates back to H2:18. The outlook medium term is bleak, and this sector would be unlikely to contribute much to Q1:19 GDP growth.
  • Manufacturing, as mining, was battered by power cuts Q1:19. For the manufacturing sector, much hinges on reforms after the national elections in May. Manufacturing will remain subdued until such time that effective reforms have been implemented.
  • Nevertheless, we’d expect some modest growth in manufacturing in 2019, albeit with downside risks. A survey by the Manufacturing Circle SA shows that close to 90% of manufacturers rely on electricity as their main source of energy. Therefore, power cuts, above-inflation electricity price hikes and rising fuel prices present key risks to real economic activity in SA.

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