Manufacturing sector surprises with a rebound in production

Picture: Bloomberg/Martin Leissl

Manufacturing production increased 2.2% in August compared with the same month in 2015, up from a 0.3% contraction in July, Statistics SA data shows.

While this was better than expected, the output numbers are still below those recorded in the second quarter and indicate that economic growth slowed in the third quarter compared to the second quarter. Lower economic growth negatively affects employment creation.

The latest manufacturing data strengthened economists’ view that the sharp uptick in economic growth recorded in the second quarter had not been sustained in the third quarter, Capital Economics Africa economist John Ashbourne said.

Manufacturing production was likely to be a “drag” on economic growth in the third quarter, Nedbank economist Nicky Weimar said.

The growth in manufacturing was driven mainly by higher production of food, petroleum, and cars.

The production of electrical machinery and furniture — both divisions that are negatively affected by weak domestic demand — fell.

The outlook for the manufacturing sector remained relatively poor because of subdued global demand and continuing low international commodity prices, Weimar said.