“Manufacturing recession bodes ill”

In his latest economic comment, Luke Doig, senior economist at Credit Guarantee Insurance Corporation (CGIC) noted that the manufacturing recession bodes ill.

Under the quotation “Rulers have no authority from God to do mischief” (Jonathan Mayhew 1720–1766), Doig told FTWO that: “An energy parastatal in distress, parlous domestic and external demand, a plunging exchange rate, adversarial labour relations and rising consumer debt levels paint a poor outlook for economic prospects. Yet the government believes that it is ‘making progress in many other areas and aspects of the government programme of action’.”

But, he added, this could not be further from the truth.

“While the pass-through effects to inflation from the weaker ZAR have been muted to date, the weak state of the manufacturing, agriculture and construction sectors, together with headwinds for consumer and government spending, paint a bleak outlook. All but daily revisions are being made to the timelines for new electricity generating capacity to come on line, thereby placing at further risk the likelihood of growth materially exceeding 2014’s 1.5% for quite some time.

“With a manufacturing sector already in recession, all efforts are required to avert the potentially debilitating effects on not just manufacturing, but the economy at large. Interest rates may well rise at least another 50 basis points this year and payment default risks remain elevated in our view.”