JOHANNESBURG, 12 DECEMBER 2017 – The latest preliminary production data for October 2017 for the metals and engineering (M&E) sector released by Statistics South Africa today shows an increase in output for the sector, said the Steel and Engineering Industries Federation of Southern Africa (SEIFSA).
Chief Economist Michael Ade said that the production in October 2017 for the sector increased by 13.4 percent on a year-on-year basis, after adjusting for the sectoral weights, following a lower-than-expected annual performance in September 2017.
Dr Ade said: “The Metals and Engineering (M&E) sub-components of the Manufacturing sector also performed well on a month-on-month basis, recording an increase of 8.5 percent in October 2017 when compared to September 2017. The increase in production in October 2017 in the M&E sector is generally in line with the broader Manufacturing Production increase of 2.2 percent on a year-on-year basis in October 2017, compared with October 2016,”.
He said the improvement in the M&E sector production figures is encouraging, especially given that all the sub-sectors performed well, recording positive output levels. The outstanding performers were the bodies for motor vehicles, trailers and semi-trailers, the special purpose machinery, the plastic products and household appliances categories.
“This is indeed good news for the M&E sector as it sets the basis for increased capacity utilisation and further growth in the sector, thereby eventually attracting new investment. What is even more encouraging is that the performance in October 2017 was 5.4 percent better than that of September 2017, which shows an acceleration of the improvement on a month-to-month basis,” said Dr Ade.He said that even though the expectation is for the sector to record better cumulative growth by the end of quarter 4 of 2017, instability in the data is still evident, given that production in September was 1.2 percent lower than in August 2017. He said although the sector contributes only a small portion of gross domestic product, it is highly sensitive to interest rates and consumer demand.
“The improved performance in the M&E sector in October 2017 aligns with forward- looking indicators for the industry. The South African Chamber of Commerce and Industry (SACCI) Business Confidence Index (BCI) rose to 95.1 percent in November 2017, from 92.9 percent in October. The Purchasing Managers’ Index (PMI) rose to 48.6 percent in November 2017, from 48.3 percent in October 2017 and 45.1 percent in September 2017. This is generally in line with the increasingly optimistic outlook for the sector, despite the index still trending below the required 50 benchmark level,” said Dr Ade.
He added that although there is an increase in output in the M&E sector, the sector’s concerns and challenges still remain. He said the sector is still under tremendous pressure stemming from structural problems, including increasing imported input costs, volatile cost of production and poor export competitiveness as companies struggle to take full advantage of increasingly favourable global demand conditions.
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