The growth in South Africa’s industrial production has slowed as the restrictions associated with the latest wave of Covid-19 remain a risk to its third quarter performance.

Data from Statistics South Africa (StatsSA) showed that manufacturing production advanced 35.3 percent year-on-year in May following an upwardly revised 88.1 percent record jump in April.

This was partly due to low base effects from last year when production plunged amid the initial effects of the Covid-19 pandemic.
StatsSA said the main positive contributions came from the manufacture of motor vehicles, parts and accessories, and other transport equipment .

Basic iron and steel, non-ferrous metal products, metal products and machinery; food and beverages; and wood and wood products, paper, publishing and printing also went up.

Investec’s economist Lara Hodes said manufacturing production rose on low statistical base factors as stringent lockdown measures impeded output.

Hodes said advance indications provided by the June purchasing managers index (PMI) survey, suggested that business activity and new sales orders remained robust in May.

She said this boded well for the second quarter manufacturing production outcome.

“However, concerns around the economic effects of the third wave led to survey respondents’ assessment of expected business conditions turning less positive,” Hodes said.

“Additionally, unreliable electricity supply continues to remain a downside risk for manufacturers and the economy as a whole, with Eskom’s energy availability factor for the week ending July 4, 2021 sitting at 68.7 percent.”

StatsSA, however, said industrial production fell 2.6 percent on a seasonally adjusted monthly basis, the most since April last year following a 1.2 percent decrease in April.

Nedbank’s senior economist Nicky Weimar said manufacturing production struggled to maintain the pace of recovery.
Weimar said until the base effects had been wholly eradicated, forecasting manufacturing activity would remain quite challenging.

She said severe power outages in June, the onset of the third wave of Covid-19 infections and the ban on alcohol sales would hurt production over the next few months.

“Moreover, manufacturing production remains well below its pre-pandemic levels, with output 7.5 percent weaker than its 2019 levels, and 8.4 percent lower than the 2017 to 2019 average, dragged by all major subsectors,” Weimar said.

“Thereafter, the recovery should resume, supported by robust global demand and high commodity prices.”

Recent political unrest in parts of the country in response to former president Jacob Zuma’s arrest threatens to further hinder economic activity.

Moreover, the government on Sunday extended by a further two weeks most of the lockdown measures, which will likely slow the economy’s rate of growth in the third quarter.

Chifipa Mhango, chief economist of the Steel and Engineering Industries Federation of SA, said the move to tighter lockdown regulations threatened to undo some of the improvement.

“The move to level 4 adjustment of the national lockdown has been disruptive to overall economic activity and is also negatively affecting supply chains,” he said.

Editor@tech-talk.co.za

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