South Africa’s manufacturing production decreased by 3.5% in June, a downward slump that has worsened compared to the previous month.
Bureau for Economic Research economists highlighted the annual decline in production in the manufacturing and mining sectors in their Weekly Review released on Monday.
According to Stats SA, manufacturing production decreased by 3.5% year-on-year (y-o-y) in June, following a downwardly revised 1.8% contraction in May.
“This was the third consecutive annual decline since April, when flooding struck transport manufacturing hub KwaZulu-Natal. Indeed, the transport subsector was still the biggest drag on annual production,” the economists said.
Output fell by 17% y-o-y, slashing 1.8% from overall growth, as the flood-affected Toyota factory was not yet back to full production in June. In addition, there were notable declines in food and beverages which were down 3.8% and 0.8% respectively, as well as steel and machinery which declined 2.9% and -0.6% for the period.
On a seasonally adjusted basis, manufacturing production tanked by 5.5% quarter-on-quarter (q-o-q) in the second quarter of 2022.
“A large decline was expected due to the flooding and related disruptions at the beginning of the quarter, and intense load-shedding towards the end of quarter two, and follows on a solid performance in quarter one. Unfortunately, the July Absa PMI suggests that the sector also experienced a tough start to quarter 3,” the economists said.
Moving to the mining sector, production plunged by a larger-than-anticipated 8% in June, from a downwardly revised 7.2% dip in May.
“This was the fifth consecutive annual decline amid a protracted strike in the gold mining sector and more intense load-shedding. The biggest drag on annual growth was gold (-8.6%), PGMs (the platinum group of metals) (-9.8%), and coal mining (-6%). Mining production contracted by 3.4% q-o-q,” the economists said.
The two sectors combined contribute roughly 17% to GDP.
“The latest batch of data is in line with our expectation that GDP will contract by about 0.5% in Q2 after registering 1.9% growth in Q1. Next week’s domestic trade sector data will give some more insight on Q2’s growth rate, with the official GDP print to follow in early September,” the economists added.
