Economy remains weak, quarterly manufacturing data shows

First-quarter manufacturing data that was released on Thursday disappointed, showing the limitations to the confidence enjoyed since the accession of Cyril Ramaphosa.

While manufacturing production figures for April are 1.1% higher than the comparable period a year ago, production fell 0.6% compared to March, suggesting that the economy has not picked up at the start of the second quarter of the year.

First-quarter data released this week showed economic growth dipped. The quarterly fall in the economy was the largest since the second quarter of 2009, indicating that the buoyant mood has done little yet to boost the economy.

Manufacturing data suggested the economy remained weak after a very poor performance in the first quarter, said Capital Economics economist John Ashbourne. “The official data suggest that the surge in confidence surrounding the February appointment of Ramaphosa has not yet flowed through to the real economy.”

While growth is expected to pick up in 2018, Ashbourne said that a swift and lasting turnaround remained unlikely, with growth continuing to be weak by historical standards.

“We doubt that accession by Ramaphosa will be able to significantly change this picture in the short term,” he said.

Maqhawe Dlamini, chief investment officer and director of Vele Asset Managers, said the latest manufacturing data could potentially damp the euphoria around the Ramaphosa presidency, but with his swearing in only in February, it was still very early days.

Despite an improvement in business and consumer confidence under Ramaphosa, producers had found it very difficult to take advantage of existing buoyancy, which was apparent from the sector’s performance, said Steel and Engineering Industries Federation of SA economist Marique Kruger.

The notable appreciation in the rand exchange rate since November 2017 seemed to be affecting manufactured exports negatively, while an increased tax burden had kept a lid on already mediocre domestic demand and ongoing policy uncertainties still kept investment spending hostage, said NKC economist Elize Kruger.

The weak economy has not deterred Ramaphosa’s plans to attract investment. Accompanied by a business delegation, he headed to Canada on Thursday for the G-7 leaders’ summit after a seven-year absence.