“We had anticipated some easing in the figures that were to be released today, given that our in-house price data on steel prices, released just over a week ago, have also been showing a similar trend,” said SEIFSA Economist Tafadzwa Chibanguza.
The index for intermediate manufactured goods recorded an 8.5% year-on-year increase in July, down from the 9.0% reading recorded a month earlier. The index for final manufactured goods increased by 8.0%, down from the 8.1% recorded a month earlier.
“Over a comparable period our in-house data for steel products from the domestic producers of steel recorded a 6.8% increase (year on year), while steel products from the domestic merchants of steel recorded a 4.9% increase, a level both indices have held for the past two months,” said Mr Chibanguza.
The exchange rate and fuel prices have been relatively stable over the month of July, leading to the conclusion that this disinflationary trend can be attributed largely to weak domestic fundamentals.
Commenting on the latest manufacturing data released with the Gross Domestic Product (GDP) figures earlier this week, SEIFSA Chief Economist Henk Langenhoven said that the data – which show a 3,4% contraction during the second quarter – indicated a possible contraction for the full year.
“The impact of the month-long strike during July had not been accounted for in the GDP data; however, one can reasonably expect it will place additional downward pressure on growth and investment,” said Mr Langenhoven.
However, SEIFSA’s evaluation of the July Kagiso/BER purchasing managers index released at the beginning of August was that the worst of the strike disruptions had been reflected in this confidence indicator.
“Depending on how long ramping back up to full pre-strike production takes, it is our view that confidence will return slowly and, with some lag, so, too, will actual production,” said Mr Langenhoven.
Although actual production data are disappointing and the full impact of the strike is not known yet, the release of fresh confidence data next week will be keenly watched to see whether there is a change for the better.