Manufacturing output unexpectedly rebounds after 18 lean months
Business Report

Manufacturing output unexpectedly rebounds after 18 lean months

Manufacturing output unexpectedly rebounds after 18 lean months

By Siphelele Dludla Time of article published 32m ago

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JOHANNESBURG – SOUTH Africa’s manufacturing industry’s recovery could lift this year’s economic growth after output unexpectedly rebounded in December 2020 following 18 consecutive months of year-on-year contraction.

Data from Statistics South Africa (StatsSA) yesterday showed that manufacturing production rose 1.8 percent in December of 2020 compared to the same month a year ago.

This followed an upwardly revised 4.1 percent slump in November 2020 and against market expectations of a 1.3 percent fall.

It was the first increase in manufacturing activity since May 2019, mainly boosted by production of food and beverages, motor vehicles, parts, accessories and other transport equipment.

StatsSA said that basic iron and steel, metal products and machinery, and wood products, paper, publishing and printing also made positive contributions to the reading.

The country has been on varying degrees of lockdown measures since the end of March 2020, with imposed restrictions dealing a serious blow to economic activity.

In 2020 manufacturers operated at 72.3 percent capacity, 8.6 and 8.9 percentage points lower than the level of capacity utilised in 2019 and 2010 to 2018, respectively.

As a result, StatsSA said total manufacturing output plunged 11 percent in 2020 year-on-year as all 10 manufacturing divisions reported negative growth rates over the year.

Total manufacturing sales also fell by 9.9 percent in 2020 over a year earlier. On a seasonally adjusted monthly basis, manufacturing output went down 0.1 percent in December compared with 0.6 percent decline in November.

In the three months to December, manufacturing production increased by 5.2 percent compared with the third quarter of 2020 as nine of the 10 divisions reported positive growth.

Steel and Engineering Industries Federation of South Africa chief economist Chifipa Mhango said the decline of manufacturing production had seen total production across the 13 sub-categories of metals and engineering sector declining by 13.6 percent in 2020 when compared to 2019.

Mhango said this had massive implications for other sectors such as construction, which led to shortages of several products due to industries operating below the prescribed capacity.

“Indeed, there was a shortage of steel as construction activity resumed and as other manufacturers that rely on steel in production also resumed operations,” he said. This year, gross domestic product is forecast to expand by 2.9 percent off the very low base of 2020 of a likely contraction of -7.3 percent yearon-year.

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