While welcoming the September data, SEIFSA Senior Economist Tafadzwa Chibanguza cautioned that this short positivity is not a reflection of long-term gains for the sector, as indicated by year-on-year contraction.
“The production figures continue to paint a dire picture for the production performance of the metals and engineering sector, although September punctuated the long-running negative trend with some levels of reprieve,” said Mr Chibanguza.
He said that when the September 2016 figures are compared to those for August 2016, the sector’s production increased by 4.32%. All the sub-sectors recorded marginal improvements, except for the general machinery (-0.11%) and motor vehicle trailer and semi-trailer (-0.08%) sub-sectors, which both recorded marginal decreases.
Mr Chibanguza said month-on-month statistics are generally characterised by volatility, cautioning against excitement unless successive monthly increases can be sustained. He stressed that it was important for the September data to be read alongside with yearly data.
He pointed out that when the year to September 2016 is compared to the same period in 2015, the sector contracted by 2.11%. More importantly, when the 12 months to September 2016 is compared to the 12 months ending September 2015, the sector had contracted by 4.18%.
Mr Chibanguza said that it was against this latter reading that SEIFSA forecast a 3% contraction in 2016.
“Unfortunately, the year-to-date and 12-month comparison paints a more realistic picture about the sector’s performance. September 2016 figures maintain SEIFSA’s mid-year diagnosis that things are much worse than we had anticipated at the beginning of 2016,” said Mr Chibanguza.
He explained that contributing the greatest contraction to the 12 months ending in September 2016, compared to a similar period ending in September 2015, is non-ferrous metal production (-1.22%), followed by general purpose machinery (-1.14%), with the other sub-sectors recording decreases of less than 1%. On the same comparison, production improvements were recorded in vehicle parts and accessories (+0.55%), electrical machinery (0.36%) and motor vehicle trailers and semi-trailers (0.06%).
The September 2016 numbers complete the third-quarter data, which show that the metals and engineering sector contracted by 1% between the second and third quarters of this year.
“When these data are read in conjunction with the Purchasing Managers Index figures released at the beginning of this month, it is evident that the fourth quarter of the year has not started on a positive note. This is a concerning picture, indeed,” Mr Chibanguza concluded.