Manufacturing activity in South Africa is expected to rise sharply for the remainder of the year supported by the suspension of load shedding and lower interest rates after output started the third quarter of 2024 on a solid note, rebounding more than expected in July.
Data from Statistics South Africa (StatsSA) yesterday showed that manufacturing production in South Africa rose by 1.7% year-on-year in July, recovering from a revised 5.5% decline in June.
The manufacturing print in July was more than an expected 0.7% increase, and marked the first rise in industrial activity after two consecutive months of decreases.
StatsSA yesterday said manufacturing production ramped up due to a sharp rebound in the production of food and beverages, and basic iron and steel, non-ferrous metal products, metal products and machinery.
Nicolai Claassen, director of industry statistics at StatsSA, said five of the 10 manufacturing divisions recorded a rise in production, with the food and beverages and metals and machinery divisions the largest positive contributors.
“Manufacturers in food and beverages recorded an increase of 9.5% year-on-year and metals and machinery output rose by 5.2% year-on-year.
“On the downside, five divisions recorded a negative month. The automotive division was the most noteworthy drag on production, recording a fall in production of 12.1%.”
Limiting manufacturing total output growth was motor vehicles, parts and accessories, and other transport equipment which declined by 12.1% in July, after declining sharply by 15.6% in June.
This reflected an 8.5% decline in motor vehicles production, a 6.2% decline in bodies for motor vehicles, trailers, and semi-trailers, and a 19.4% decline in parts and accessories.
Year-to-date, the automotive sector is down by 10.4%, consistent with weak demand amid affordability challenges and a high interest rate environment.
On a month-on-month basis, seasonally adjusted manufacturing production rose by 2.1% in July compared with a decline of 0.4% in June.
Seasonally adjusted manufacturing production shrank by 0.5% in the three months ended July compared with the previous three months.
FNB senior economist Thanda Sithole said the July manufacturing print aligned with the improvement in the Purchasing Managers’ Index (PMI) business activity index, which rose to 50.8 points from 36.3 in June.
Year-to-date, output remains lower by 0.4% compared to the same period last year, weighed on by weaker production in the automotive, basic iron and steel, and furniture divisions.
“The 0.4% year-to-date decline reflects challenging demand conditions due to weak consumer fundamentals and broad-based weakness in private sector fixed investment,” Sithole said.
“However, a modest recovery is anticipated in the near term, although it will likely be uneven. This is indicated by the PMI expected business conditions index, which, despite falling to 61.3 points in August, remains above the 58.7 recorded at the start of the year.
“Moving forward, a load shedding free environment, the expected interest rate cuts, and a more stable rand will be critical factors in supporting manufacturing activity.”
BUSINESS REPORT