Manufacturing production plummeted in March and came in much weaker than expected, according to the latest data released by Statistics South Africa.
Bureau for Economic Research economists noted in their Weekly Review that the latest official data showed that manufacturing output had decreased by 2.2% month-on-month and was down by 6.4% compared to March 2023, marking the biggest annual decline in almost two years.
“While monthly fluctuations are noteworthy, examining quarterly trends offers a clearer understanding of the sector's dynamics and gives a good idea of the sector’s contribution to GDP growth,” the BER noted.
During the first quarter of 2024, output was 1% lower than in the fourth quarter of 2023.
“Notably, two of the largest divisions made positive contributions to quarterly growth: food and beverages (2.7% q-o-q) and petrochemicals (2.6% q-o-q). This was outweighed by steep declines in vehicle manufacturing (-14.9%) and steel and machinery (-3.1%),” the economists said.
“Fortunately, following a poor start to the year, the recent more upbeat Absa PMI suggests a potential improvement in production in April.”
April’s electricity production is also expected to be better than it was in the first quarter due to the absence of load-shedding. More load-shedding in 2024Q1 relative to 2023Q4 meant that electricity output was down 1% q-o-q.
Similar to the recent Absa Purchasing Managers Index (PMI) result, the S&P Global South Africa PMI showed an increase in April.
“Both indicators have now surpassed the critical 50-point threshold, signalling an expansionary phase. However, unlike the Absa PMI, the S&P PMI reported a slight decline in new order sales compared to March,” the economists said.
“Nevertheless, both sets of results underscore the beneficial impact of reduced load-shedding and fewer supply chain disruptions on business operations in SA.”
Meanwhile, SA’s gross foreign reserves declined from their three-month high of $62.3 billion in March to $61.8bn in April. There was a $93-million drawdown in foreign exchange reserves, but this was counterweighed by a $408 million increase in gold reserves, boosted by an especially high gold price in April.
