Data sig­nals tough task for Ramaphosa

• Sec­tor’s con­trac­tion of 2.4% in Septem­ber will weigh on the third-quar­ter’s GDP num­ber

Business Day - - FRONT PAGE - Lyn­ley Don­nelly Eco­nom­ics Writer don­nel­[email protected]­nesslive.co.za

As Pres­i­dent Cyril Ramaphosa drummed up prom­ises of fur­ther in­vest­ment in SA, data re­leased on Thurs­day un­der­scored the dif­fi­cul­ties he faces in re­viv­ing an econ­omy that has not grown more than 2% in the past five years.

As Pres­i­dent Cyril Ramaphosa drummed up prom­ises of fur­ther in­vest­ment in SA, data re­leased on Thurs­day un­der­scored the dif­fi­cul­ties he faces in re­viv­ing an econ­omy that has not grown more than 2% in the past five years.

Fac­tory out­put fell for the fourth month run­ning in Septem­ber, with nine out of 10 man­u­fac­tur­ing sec­tors shrink­ing on an an­nu­alised ba­sis, ac­cord­ing to Stats SA fig­ures.

The out­come sug­gests that the man­u­fac­tur­ing sec­tor will weigh on eco­nomic growth fig­ures for the third quar­ter of 2019, said analysts. The econ­omy grew 3.1 % in the sec­ond quar­ter, but third-quar­ter fig­ures are not ex­pected to be as buoy­ant.

Man­u­fac­tur­ing pro­duc­tion fell 2.4% year on year in Septem­ber, with only the food and bev­er­ages sec­tor record­ing growth. The read­ing came in be­low ex­pec­ta­tions for a less se­vere 0.9% de­cline.

On a sea­son­ally ad­justed ba­sis, pro­duc­tion over the past three months shrank 0.9% com­pared with the sec­ond quar­ter of the year, making it the third quar­terly con­trac­tion run­ning.

“The man­u­fac­tur­ing sec­tor re­mains deeply strained and Septem­ber’s re­lease con­firms that the sec­tor will be a neg­a­tive con­trib­u­tor to Q3 eco­nomic growth,” said El­ize Kruger, an­a­lyst at NKC African Eco­nom­ics.

The out­look is also un­likely to im­prove in the near term, ac­cord­ing to Ned­bank economists Candice Reddy and Den­nis Dykes, judg­ing by re­sults of the lat­est gauge of sen­ti­ment in the sec­tor.

The most re­cent Absa-BER pur­chas­ing man­agers’ in­dex, re­leased in the past week, re­mained in con­trac­tion ter­ri­tory and has done so for most of the year.

On Thurs­day, busi­ness con­fi­dence as mea­sured by the SA Cham­ber of Com­merce and In­dus­try (Sacci) reg­is­tered a month-on-month de­cline in

Oc­to­ber, driven by lower im­ports and ex­ports, rand de­pre­ci­a­tion and load-shed­ding.

The Sacci busi­ness con­fi­dence in­dex mea­sured 91.7 in Oc­to­ber, down 0.7 points from Septem­ber’s read­ing.

The in­dex was down 4.1 points on last year ’ s Oc­to­ber read­ing of 95.8.

Con­fi­dence levels ap­pear to have hit a plateau, the cham­ber said in a state­ment on Thurs­day, at a time when pol­i­cy­mak­ers have “lit­tle ma­noeu­vring space” to set the econ­omy on course.

Last month’s medium-term bud­get pol­icy state­ment — which showed that eco­nomic growth is only ex­pected to reach 0.5% in 2019, along with a sharp de­te­ri­o­ra­tion in gov­ern­ment fi­nances — saw rat­ings agency Moody’s In­vestors Ser­vice drop its out­look on SA gov­ern­ment debt to neg­a­tive.

“It is doubt­ful whether the cur­rent fis­cal sit­u­a­tion could be con­tained and re­versed to in­spire growth and em­ploy­ment,” Sacci said.

“Credit rat­ings agen­cies, lenders and in­vestors are re­luc­tant to make de­ci­sions in an un­cer­tain en­vi­ron­ment. The need for eco­nomic growth and re­duc­ing un­em­ploy­ment must take cen­tre stage,” it said.

/Reuters

Wait­ing for an uptick: A car­pen­ter waits to sell cup­boards to cus­tomers at his work­shop in Soweto. The man­u­fac­tur­ing sec­tor is un­der se­vere strain and is un­likely to re­cover soon.

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