SA man­u­fac­tur­ing shows signs of life

The Star Early Edition - - BUSINESS REPORT - Wise­man Khuzwayo

SOUTH Africa’s man­u­fac­tur­ing pro­duc­tion fared much bet­ter in Novem­ber, but was nonethe­less un­der­per­form­ing in con­trast to global fig­ures, data showed yes­ter­day.

Man­u­fac­tur­ing out­put sur­prised on the up­side when it rose by 1.9 per­cent year-onyear in Novem­ber, beat­ing mar­ket ex­pec­ta­tions, af­ter con­tract­ing by 2.7 per­cent in Oc­to­ber, Sta­tis­tics South Africa (Stat­sSA) said yes­ter­day.

On a month-on-month ba­sis, fac­tory pro­duc­tion rose 0.3 per­cent but edged down 1.1 per­cent in the three months to Novem­ber com­pared with the pre­vi­ous three months.

Mar­ket con­sen­sus was a 0.9 per­cent de­crease in man­u­fac­tur­ing vol­umes.

Ned­bank said the man­u­fac­tur­ing sec­tor was ex­pected to fare bet­ter in 2017, with out­put ris­ing off last year’s low base as global growth ac­cel­er­ated mod­er­ately, in­ter­na­tional com­mod­ity prices con­tin­ued to drift higher and do­mes­tic de­mand con­di­tions start to im­prove.

Ned­bank said yes­ter­day’s fig­ures again con­firmed that eco­nomic ac­tiv­ity re­mained weak and un­der­ly­ing con­fi­dence frag­ile.

It said the up­side risks to in­fla­tion had eased no­tice­ably since all three ma­jor rat­ings agen­cies af­firmed South Africa’s sov­er­eign risk rat­ing in early De­cem­ber and the rand has held up rel­a­tively against most ma­jor cur­ren­cies so far in Jan­uary.

“These devel­op­ments have re­duced the chances of fur­ther mon­e­tary tight­en­ing in early 2017.

“In­ter­est rates have prob­a­bly peaked. We still ex­pect the MPC (mon­e­tary pol­icy com­mit­tee) to re­main cau­tious, leav­ing rates at cur­rent lev­els for some time, given the down­side risks posed to the rand by a volatile do­mes­tic land­scape and chang­ing global dy­nam­ics.”

The Bar­clays Bank man­u­fac­tur­ing PMI (pur­chas­ing man­agers’ in­dex) re­mained be­low the neu­tral thresh­old of 50.0 last month at 46.7, fol­low­ing read­ings of 48.3 in Novem­ber and 45.9 in Oc­to­ber.

For the fourth quar­ter as a whole, the in­dex av­er­aged lower, at 47.0 com­pared with 48.9 in the third quar­ter.

Kamilla Ka­plan, an econ­o­mist at In­vestec, said the ad­vance in­di­ca­tions pro­vided by the PMI would there­fore sug­gest ac­tual man­u­fac­tur­ing pro­duc­tion did not re­cover mean­ing­fully in the last quar­ter, from the con­trac­tion in the third quar­ter.

She said the de­cline in the PMI at the year-end raised some con­cern over the out­look for the sec­tor head­ing into 2017.

She said ex­ter­nal de­mand was ex­pected to re­main mostly mod­est, with the World Bank re­cently pre­dict­ing only a muted re­cov­ery in global trade mo­men­tum in 2017, with down­side risks stem­ming from more pro­tec­tion­ist trade pol­icy mea­sures among the ma­jor economies.

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