JOHANNESBURG, 19 OCTOBER 2016 – Figures released by Statistics South Africa (StatsSA) today show production in the sector declined by 3,9% up to August this year, while employment numbers dropped by 3,1% over the same period. Over a 12-month period, production contracted by 4,9%, while employment has fallen by 2,2%.

Commenting on the data, SEIFSA Chief Economist Henk Langenhoven said that the latest production (August 2016) and employment data (second quarter 2016) show no relief in the economic contraction experienced by the metals and engineering sector.

“The great concern is that production is still falling faster than the employment shed over the first half of 2016. These numbers are in contrast to overall manufacturing, which recorded some improvement in production over the year to August 2016,” he said.

Mr Langenhoven said that it is obvious that the production performance of sub-industries in the metals and engineering sector paints a dire picture. Sub-industry figures show that:

  • On a 12-month basis, only electrical machinery and equipment manufacturing registered growth of 3%, which is lower than the +5,5% recorded by the end of July this year.
  • Over the eight months of 2016, electrical machinery and equipment grew by +0,3% (against 3% previously) and other fabricated metal production grew by +1,2% (against 0,5% in the previous period).
  • Basic ferrous production was slightly up by 0,4%. All the other groupings contracted, resulting in the 3,9% decline.
  • Of growing concern is that month-on-month performances have deteriorated for some time now. This year, August production was 2,5% lower than July production, which was 2,1% lower than June’s. Only other fabricated metals (+3,7%), general machinery (+1,6%) and household appliances production (+1,3%) increased.

Mr Langenhoven said that the employment survey was done in the middle of the second quarter of 2016. That quarter showed a slight 0,3% (equivalent to 1 044 people) improvement in employment numbers on the first quarter.

“This was in line with a slight improvement in activity during March and April this year, which unfortunately subsided again. Over the first six months period, employment declined by 3,1% on the last half of 2015, and by 2,2% over 12 months,” he added.

Regarding the drop in employment, Mr Langenhoven explained that over a year period (ending in June 2016) the sector recorded a loss of 8 521 jobs. Despite this disappointment, more jobs were created by the electrical machinery and equipment (+1 545), ship building (+297), railway rolling stock (+378), rubber (+501), plastics (+125) and metal castings (+12) sub-industries.

“As for future employment, perceptions are generally negative and in some industries extremely negative,” he said.

The employment indicator of the Barclays/Bureau for Economic Research (BER) purchasing managers’ index (shows a further decline of 3,8% in September this year, which was a continuation of the August 2016 pattern. The latter information covers the manufacturing sector as a whole).

The BER quarterly manufacturing survey differentiates amongst the different sub-industries in the metals sector.

Mr Langenhoven further said that analysis showed that all the sub-industries, bar electrical machinery and equipment (which was highly positive), showed negative sentiment regarding employment numbers towards the end of the year.

“Basic metals indicated some easing, but still had a negative outlook, while fabricated metals and machinery were highly negative about employment prospects. The plastics industry was slightly negative, with the outlook deteriorating towards the end of the year,” he explained.

Reiterating SEIFSA’s previous sentiments of concern, he added that confidence is deteriorating regarding the sector’s future performance, with implications of an extended period of decline.

“Indications are stronger now that these conditions will only improve towards the latter half of 2017. The latest production numbers point to such an outcome. All indications are that job losses will also not ease up for the foreseeable future,” Mr Langenhoven said.