Production uptick quickens in March

SA’s manufacturing sector showed recovery in March, rising at its fastest pace in almost two years and providing a small first-quarter bump for the economy. Overall factory output increased by an annual 4.6% in March, after a revised 2.5% drop in February.

SA’s manufacturing sector showed recovery in March as second-wave lockdown conditions eased, rising at its fastest pace in almost two years, and providing a small first-quarter bump for the economy.

Overall factory output increased by an annual 4.6% in March, after a revised 2.5% decline in February, its best performance since April 2019, Stats SA said on Tuesday. Economists had expected a recovery in activity as socioeconomic restrictions eased in that month, and Bloomberg’s prediction was for a 1% increase year on year.

Food and beverages jumped 10.4% year on year, contributing 3.0 percentage points to the headline figure, while the motor and transport sector surged 25.9%, contributing 2.1 percentage points.

The Steel and Engineering Industries Federation of Southern Africa (Seifsa) welcomed the release, saying the figures bode well for the metals and engineering industry as they signal a return, albeit slow, return to normal economic activity.

“When you look at these figures in conjunction with recently released capacity utilisation data of 74% in the manufacturing sector for the first quarter of 2021, it can be surmised that there is more room for increased activity and hence production,” said Seifsa chief economist Chifipa Mhango.

The surprise print was supported by the uptick in economic activity from SA’s export partners and looking ahead much of the rebound in activity will stem from global demand, Nedbank economists Nicky Weimar and Candice Reddy said. “A gradual uptick in the domestic environment will offer some support, though unreliable electricity supply and underlying structural constraints will continue to pose downside risks to the sector’s recovery.”

The pandemic hit SA’s already under pressure manufacturing industry hard, and output had fallen for 18 consecutive months from June 2019 to November 2020, before recovering in December.

Activity was again hit in January and February as SA grappled with a second wave of Covid-19, which prompted further lockdown restrictions.

March is the final month of SA’s first quarter and Stats SA data showed on Tuesday that manufacturing should help support GDP in early 2021.

Seasonally adjusted manufacturing production increased 0.3% in the first quarter of 2021 compared with the fourth quarter of 2020.